Morgan Stanley retains the Lucerne County Pension Fund contract
Morgan Stanley will continue to oversee Luzerne County’s employee retirement fund, which is currently valued at about $291 million, the County Retirement Board ruled Wednesday.
The board voted in January to publicly solicit requests from companies interested in acting as advisors as Morgan Stanley’s current contract expires.
Two other companies had submitted proposals – PNC Institutional Management and Conrad Siegel.
Executive Vice Chairman Brian Thornton, a county councillor, said Morgan Stanley had proposed the lowest fee and board members agreed it had served the county very well.
The new three-year deal begins May 1 with options for two more one-year extensions, Thornton said.
Board member Romilda Crocamo, the county’s acting manager, said the team managing the fund is local but has access to broad investment resources because Morgan Stanley is a global company.
“I think they have developed well for the county over the years. They responded very quickly to our requests,” Crocamo said.
Morgan Stanley has overseen the fund since October 2008. The board publicly solicited proposals from other companies in 2011 and 2015, both times opting to retain Morgan Stanley.
Richard Hazzouri, a representative for Morgan Stanley, said the company has agreed to reduce its fee to a new 0.10% from 0.12% of assets advised.
“We are obviously thrilled with the Retirement Committee’s decision and look forward to continuing to work with the Board on behalf of district employees and retirees,” said Hazzouri.
The fund hit a record $311 million at the end of 2021 with net investment income of $31 million for the year, up 11%, Hazzouri said.
This year through March, the fund had net cuts of $4.6 million and investment losses of $15.4 million, reducing the appraised value to $291 million, it reported to the board on Wednesday . That equates to a year-to-date return of -4.98%.
However, Hazzouri emphasized that these figures are preliminary and are expected to improve. Morgan Stanley has yet to receive final first-quarter returns from alternative and private equity/credit investments that should be positive for the fund’s status, he said.
The country is still faring better than many as global equities fell 5.5% and bonds fell nearly -6% over the period, Hazzouri said.
“I’m pleased that the fund has held up well in a very challenging market, but I’m not happy when a client’s portfolio is in decline,” he said.
With the county’s public fund, the goal is to maximize returns without exposing it to undue risk — while ensuring there’s always enough cash on hand to cover ongoing pensions, Hazzouri reiterated. The fund must pay retirees about $20 million annually in pension benefits.
Tax subsidies have been required since 2002, when capital gains and employee contributions fell short of statutory pension obligations.
This year’s taxpayer grant is budgeted at $14 million, with $10.8 million coming from the general fund and the rest being covered by other funds, officials said.
The Retirement Committee, alongside Thornton and Crocamo, includes Brian Swetz, County Budget/Treasury Director, John Evanchick Jr., Employee/Retiree Representative, and Kendra Radle, Member of the County Council, as Board Chairs.