A legislative audit revealed last week that the Arkansas Teacher Retirement System (ATRS) understated the value of its private equity investments by $12.2 million. The report, issued by the auditors, discovered that of the 23 ATRS-managed private equity accounts, 13 had errors. It also suggested that the system had an unqualified staff and inadequate training and supervision.
David Malone, executive director of Arkansas’ largest retirement fund, said that the findings indicate a need for a more professional staff, which would require higher salaries than the system is allowed to pay. The system’s chief investment officer makes less than $60,000 per year, compared to a national average of well over $100,000.
Separately, ATRS is watching the financial woes of Alliance Capital Management, the giant mutual fund that manages about $274 million for the pension. In November Alliance dismissed two senior executives. New York-based Alliance, which has $438 billion in assets under management, says it let the executives go for allowing market timing of fund shares.
In addition, ATRS’ board of trustees fired Putnam Investments Inc., the troubled Wall Street money manager that handles more than $500 million in international stocks for the system. ATRS joins a growing list of pension funds to dump Putnam amid accusations of improper mutual fund trading.
Malone, a former state senator, told the Arkansas News Bureau that the Alliance situation is different than Putnam because the executives that were fired were not directly involved in managing ATRS’ funds.