Retirement insights from a Colorado PERA perspective

A distant view shows a mountainous landscape with sloping peaks, green trees in the foreground, and a cloudy sky above.

In late February, global markets saw a dramatic increase in volatility. At the onset of this changed environment, PERA’s Chief Investment Officer, Amy C. McGarrity, <a rel="noreferrer noopener" href="https://peraontheissues.com/peras-chief-investment-officer-addresses-market-drop/" target="_blank">shared</a> how PERA&#8217;s long-term strategy accounts for such downturns. Ron Baker, PERA&#8217;s Executive Director, has <a rel="noreferrer noopener" href="https://peraontheissues.com/peras-response-to-covid-19/" target="_blank">explained</a> how the organization adapted to rapidly changing circumstances while continuing its operations.



Now, in the new video below, the two PERA leaders discuss the status of PERA&#8217;s investments, PERA&#8217;s funded status, and the outlook for the days ahead.



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PERA Investment Update

Two members of
PERA’s leadership team have recently been selected by Governor Polis to serve on
Colorado statewide boards impacting private-sector retirement security and
state employees. These appointments underscore PERA executives’ retirement,
investment, financial, and human resource administration knowledge.



Colorado PERA
Chief Investment Officer Amy C. McGarrity was appointed to the <a href="http://leg.colorado.gov/bills/sb19-173">Colorado Secure Savings Plan
Board</a>, which studies the feasibility of creating the
Colorado Secure Savings Plan and other appropriate approaches to increase the
amount of retirement savings by Colorado’s private sector workers. McGarrity
was appointed to serve as a representative with expertise in investment or
retirement savings plan administration. Her term will expire on July 1, 2021.



“PERA has an
excellent track record when it comes to designing supplemental retirement
savings vehicles like the <a href="https://www.copera.org/recap-of-pera-boards-september-meeting" class="broken_link">PERAPlus 401(k) and 457
Plans</a> to help public sector workers increase their
retirement savings,” McGarrity said. “I’m honored to be appointed to the
Colorado Secure Savings Board, and look forward to applying my background and
passion to improving retirement security for all Coloradans.” 



See this PERA on the Issues post for more on the
Secure Savings Plan Board: <a href="https://content.copera.org/colorado-pera-chief-investment-officer-and-internal-audit-director-appointed-to-state-boards/">Colorado
passes private sector retirement savings plans study</a>.



Internal Audit
Director Sarah Wager was appointed by Governor Polis to the <a href="https://www.colorado.gov/pacific/spb/general-information">State
Personnel Board</a> in June. The State Personnel Board
adopts, amends, and repeals the procedures concerning
the State personnel system. Her term on the Board expires June 30, 2022.



Wager
noted, “I’ve worked within the State Personnel System for nearly 25 years, as
an employee, a supervisor, a member of executive leadership, and have been
responsible for overseeing human resource activities at a State agency. I am
excited and honored to use my knowledge of the State Personnel System and
employment matters impacting State employers and employees and to serve on this
Board and contribute to the Board’s important mission.”&nbsp; 



Colorado
PERA is known for its expertise on critical issues impacting the well-being of
public workers and retirement security of all Colorado residents. In their
roles on state boards, McGarrity and Wager will continue to support sound public
policy in their respective areas of expertise to the benefit of government
employees and all Coloradans.

Colorado PERA Chief Investment Officer and Internal Audit Director Appointed to State Boards

<a href="https://www.ai-cio.com/" target="_blank" rel="noreferrer noopener">Chief Investment Officer</a> has named Colorado PERA Chief Investment Officer Amy McGarrity as a finalist for its <a href="https://www.ai-cio.com/news/cio-announces-innovation-awards-finalists-dec-13-gala/" target="_blank" rel="noreferrer noopener">2018 Industry Innovation Awards</a>. The nominees, who are recommended by their peers, are recognized as “the brightest and most forward-looking” investment leaders of public and corporate pensions, foundations, endowments, and other large institutional investors.



McGarrity has been PERA’s Chief Investment Officer (CIO) since March 2017. Previously, she was CIO of the Denver Public Schools Retirement System (DPSRS) and joined PERA in 2010 when the systems merged. She left PERA in 2016 to work for a private investment firm and returned in 2017 to oversee PERA’s $49 billion <a href="https://www.copera.org/investments" target="_blank" rel="noreferrer noopener">investment program</a>.



“I’m delighted to learn of this nomination and honored to be named with investment colleagues around the country who I consider to be innovative leaders in the field,” McGarrity said.



Winners will be chosen and announced in December by the CIO editorial team in conjunction with an advisory board of former and current chief investment officers.



Public Defined Benefit Plan $15 Billion to $100 Billion Finalists



Amy McGarrity, Colorado Public Employees’ Retirement Association



Scott Davis, <a href="https://www.in.gov/inprs/leadership.htm" target="_blank" rel="noreferrer noopener">Indiana Public Retirement System</a>



Johnathan Grabel, <a href="https://www.copera.org/colorado-pera-chief-investment-officer-amy-mcgarrity-honored" target="_blank" rel="noreferrer noopener" class="broken_link">Los Angeles County Employees Retirement Association</a>



Robert Maynard, <a href="https://www.copera.org/colorado-pera-chief-investment-officer-amy-mcgarrity-honored" target="_blank" rel="noreferrer noopener" class="broken_link">Public Employees’ Retirement System of Idaho</a>



John Skjervem, <a href="https://content.copera.org/colorado-pera-chief-investment-officer-amy-mcgarrity-honored/" target="_blank" rel="noreferrer noopener">Oregon State Treasury</a>



Tom Tull, <a href="https://ers.texas.gov/About-ERS/ERS-Investments-overview/Investments-Division" target="_blank" rel="noreferrer noopener">Employees Retirement System of Texas</a>



Congratulations and good luck, Amy!

Colorado PERA Chief Investment Officer Amy McGarrity Honored

PERA CIO sends comments to the SEC to improve transparency in equity trading and research after MiFID II impacts European markets



New government regulations are rarely thought of as transformational, but a recent regulatory change out of Europe is proving the exception. New rules for the investment community have increased transparency and, ultimately, fairness for investors – including the members and retirees who belong to PERA.



PERA staff work diligently to stay aware of the latest trends in investment markets and to advocate for increased <a href="https://www.copera.org/pera-advocates-for-increased-transparency-at-the-federal-level" target="_blank" rel="noreferrer noopener" class="broken_link">shareholder rights</a>, transparency in <a href="https://www.copera.org/retirement-roundup-long-1-million-last" target="_blank" rel="noreferrer noopener" class="broken_link">investments</a>, and <a href="https://www.copera.org/pera-advocates-for-increased-transparency-at-the-federal-level" target="_blank" rel="noreferrer noopener" class="broken_link">strong corporate governance</a>. Recently, PERA Chief Investment Officer (CIO) Amy McGarrity wrote to the Securities and Exchange Commission (SEC) asking for guidance that would increase pricing transparency in investment research.



McGarrity wrote the letter in part as a response to the regulation known as <a href="https://mifidii.thomsonreuters.com/en/what-is-mifid-ii.html" target="_blank" rel="noreferrer noopener" class="broken_link">MiFID II</a>. On January 3, 2018, the Markets in Financial Instruments Directive came into effect impacting the UK and European markets. The intent is to provide greater transparency and protection to investors in various asset classes, including the equities, bonds, and currencies in which Colorado PERA invests. While the new rules directly apply to European investors, banks, asset managers, and other market participants, McGarrity’s letter was a direct result of the impact of MiFID II on the investment landscape across the globe.



PERA is particularly interested in sections of MiFID II related to the distribution of investment research and how such research is compensated. Why is PERA focused on this area? PERA invests a significant portion of Fund assets “in house,” including the internal management of approximately 70 percent PERA’s stock investments. In their active asset manager roles, PERA analysts use broker-generated research to help explore investment ideas in detail. This research can range from data in specific industries to company-specific research that would be burdensome and redundant for PERA to replicate.



Traditionally, investment research generated by brokers has been paid via a “bundled” relationship. That is, when PERA would need to trade stocks, the broker or investment bank that executed the trade would then allow PERA access to their research products. MiFID II prohibits this bundling of trading and research. Instead, trading must be compensated for on its own merits, as must research. Consequently, in Europe, research is now paid for primarily by asset managers out of their profits. Similarly, trading relationships must rest solely on the best, or most cost-effective, execution of stock trades.



The benefits of this disruption of the status quo are being felt. Direct payment for research has already greatly improved the transparency of research service pricing, as specific research charges are negotiated. In the bundled model, research pricing has been opaque, with banks avoiding any discussion of explicit costs, thus limiting the ability of investors such as PERA to determine if they have been paying an appropriate amount for the product. MiFID II also has liberated the trading side of the equation by making the choice of transacting broker clearly based on execution skill, rather than unrelated research quality and access. Again, when bundling, trading decisions are less transparent given that the research product cost must be considered.



In the letter from PERA to the SEC, McGarrity recommended that the SEC increase pricing transparency by providing clear guidance that would allow U.S. investors to pay directly for research, rather than receiving research as part of a bundle of services paid for by commissions. PERA’s Equities Division is already in the process of negotiating clear, specific research arrangements with a variety of providers, and form of payment remains a topic of debate. While many of PERA’s research relationships will accept a check from PERA, others have interpreted the latest SEC guidance as limiting the ability of investors to directly pay for research due to on-going regulations.



PERA will continue discussions with the “holdout” brokers still requiring trade commissions to access research, while also engaging with the SEC on the issue. In the meantime, PERA will set firm expectations with research providers, pay for research directly where permitted, and create as much transparency as possible where bundling remains. These efforts will continue to ensure that investment costs are low, ultimately benefiting the PERA membership and Colorado taxpayers.



Read PERA Chief Investment Officer’s <a href="https://content.copera.org/pera-advocates-for-increased-transparency-at-the-federal-level/" target="_blank" rel="noreferrer noopener">letter to the SEC</a>.

PERA advocates for increased transparency at the federal level

Three members of PERA’s leadership team have recently been tapped to serve national organizations. These appointments and elections underscore PERA executives’ retirement, investment, and financial industry knowledge.



Amy McGarrity, PERA Chief Investment Officer (CIO), has been named to serve on the U.S. Securities and Exchange Commission’s (<a href="https://www.copera.org/protecting-shareholder-rights-pera-advocates-for-members-and-investors" target="_blank" rel="noreferrer noopener" class="broken_link">SEC</a>) newly created Fixed Income Market Structure Advisory Committee. McGarrity joins other retail and institutional investors to “provide advice to the SEC on the efficiency and resiliency of fixed income [bond] markets and identify opportunities for regulatory improvements,” according to the SEC’s <a href="https://content.copera.org/pera-staff-selected-to-serve/" target="_blank" rel="noreferrer noopener">news release</a>.



McGarrity was named PERA CIO in March of this year after a nationwide search. McGarrity previously worked for PERA as the Deputy Chief Investment Officer and first came to PERA after the merger of the Denver Public Schools Retirement System in 2010. McGarrity is a <a href="https://www.copera.org/pera-staff-selected-to-serve" target="_blank" rel="noreferrer noopener" class="broken_link">CFA Charterholder</a> and has served on the<a href="https://content.copera.org/pera-staff-selected-to-serve/" target="_blank" rel="noreferrer noopener"> Public Company Accounting Oversight Board (PCAOB) Investor Advisory Group.</a>



Lawrence Mundy, PERA Chief Financial Officer (CFO), was recently elected to the board of directors of the <a href="http://www.p2f2.org/" target="_blank" rel="noreferrer noopener">Public Pension Financial Forum (P2F2)</a>. P2F2’s mission is to “serve its membership through education, pension advocacy, and networking by promoting financial excellence for public pension plans.”



Mundy was selected as PERA CFO in February 2017 and first came to PERA in 2012. Mundy is a licensed CPA in Colorado and also serves on the <a href="https://www.copera.org/pera-staff-selected-to-serve" target="_blank" rel="noreferrer noopener" class="broken_link">Colorado Society of CPA’s Government Issues Forum</a> as well as on the <a href="http://www.gfoa.org/committee-retirement-and-benefits-administration-corba" target="_blank" rel="noreferrer noopener">GFOA Committee on Retirement and Benefits Administration</a>.



In October, Gregory W. Smith, PERA Executive Director/CEO, was elected to serve as a member of the Executive Committee of the <a href="http://www.nctr.org" target="_blank" rel="noreferrer noopener" class="broken_link">National Council on Teacher Retirement</a> (NCTR). NCTR was formed in 1924 and is “dedicated to safeguarding the integrity of public retirement systems in the United States and its territories to which teachers belong and to promoting the rights and benefits of all present and future members of the systems.”



Smith was named PERA’s sixth executive director in 2012 and, prior to leading PERA, was PERA’s General Counsel and Chief Operating Officer. Smith currently serves as the Chair of the Board of Directors of the <a href="http://www.nirsonline.org">National Institute on Retirement Security</a> (NIRS) and as a Co-Chair of the Board of Directors for the <a href="http://www.cii.org/board_of_directors" target="_blank" rel="noreferrer noopener">Council of Institutional Investors</a> (CII).



See also PERA on the Issues: <a href="https://www.copera.org/pera-staff-selected-to-serve" target="_blank" rel="noreferrer noopener" class="broken_link">PERA General Counsel Elected by National Pension Group</a>

Tag Archives:

PERA Investment Update

Colorado PERA Chief Investment Officer and Internal Audit Director Appointed to State Boards

Colorado PERA Chief Investment Officer Amy McGarrity Honored

PERA advocates for increased transparency at the federal level

PERA staff selected to serve

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