"A legislative fight between North Carolina Treasurer Janet Cowell and a state employee association is signaling growing tension over disclosure practices as public pensions seek to improve returns with alternative investments.
Cowell, a 45-year-old Democrat, opposed a bill by the State Employees Association of North Carolina to require more disclosure about deals with Wall Street firms hired to manage alternatives to stocks and bonds for the $87 billion pension she controls. Cowell warned that giving out more information would cost more than $1.8 billion for violating secrecy agreements, and instead supported a bill that would conceal details for five years after a contract is completed.
...Most private-equity and hedge-fund investments come with agreements that prevent pensions from disclosing certain information, including details on fees, investment strategy and other “trade secrets.”
...North Carolina assumes its pension must earn 7.25 percent annually to cover promised benefits and to calculate what local governments and the state must contribute...
North Carolina has about $18.7 billion of alternative investments, or 21.5 percent of its assets. In 2007 it was 3 percent and the state has authority to increase it to 35 percent. The pension lagged behind both of its benchmarks for private equity and hedge funds for the past 10 years, according to its financial report.
Still, the state paid $416.2 million to firms hired to manage pension money last fiscal year, according to its annual report. A footnote says that it didn’t disclose all fees, such as those for fund-of-fund investments.
...In May, U.S. Securities and Exchange Commission Chairwoman Mary Jo White told Congress that hedge funds and private-equity firms have created bogus service providers to boost fees from portfolio companies and investors. More than half of about 400 private-equity firms that the SEC staff examined charged unjustified expenses...
...In January, North Carolina’s state employees association hired Edward Siedle, a former SEC attorney and now president of Benchmark Financial Services, to investigate the fund’s investments. Siedle found what he said are hundreds of millions of dollars of undisclosed fees.
...The five-year period of secrecy the treasurer supports would mean the statute of limitations for securities fraud claims would expire before documents are made public...
...North Carolina, New York, Connecticut and Michigan are the only states that have a single person overseeing their pensions, and Cowell has close ties with the financial services industry. She has taken campaign contributions from some companies that have won contracts to manage alternative investments.
Of the $1.1 million Cowell received for her 2012 campaign, $196,710 came from the financial industry..."
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