In an interview with Variety yesterday, Wilshire Associates Inc. managing principal Maggie Ralbovsky said P.L. 17-51 caused the automatic dissolution of money manager BlackRock’s contract and has put the investment strategy of the Fund in jeopardy.
“The fact that the Fund cannot invest with BlackRock strips the Fund of its anchor manager in the new ‘glide path’ [investment strategy],” Ralbovsky told Variety.
During her Aug. 22 meeting with the Fund board, the trustees approved Wilshire’s “glide path” recommendation.
This approach called for the Fund to de-risk as time goes on, step by step, and to have an investment program that’s prudent for the level of assets.
Although the Fund, she said, has a short investment horizon, the glide path approach is only a way to contain the damage from the volatile market and not a way to solve any funding level.
Ralbovsky said the glide path approach wouldn’t work without BlackRock — the money manager whose contract self-terminated when then-acting Gov. Eloy S. Inos signed the beneficiary derivative lawsuit measure into law on Sept. 5.
Under the glide path approach, the $100 million that now sits with the custodian Bank of Hawaii, should have been allocated to four asset classes in the new asset allocation: U.S. equity, international equity, fixed income, and liquidity.
She said half of this money or $50 million should be kept liquid or in cash.
For Ralbovsky, BlackRock is the most important money manager for without it, the Fund will not be able to transition to its new asset allocation.
“Blackrock is the most important manager in the board approved investment strategy which right now is entirely crippled,” said Ralbovsky.
The latest among the contract terminations include the Fund’s actuary Buck Consultants.
In a statement yesterday, the Fund said, “As it stands right now, Wilshire, the Fund’s investment consultant, Buck Consultants, the Fund’s actuary, and at least two money managers have terminated their contracts with the Fund.”
The Fund said it can no longer manage its assets in order to provide benefits to the beneficiaries.
House Floor Leader George N. Camacho has pre-filed House Bill 17-220 on Monday to repeal P.L. 17-51.
According to the bill, “The Fund had been adversely affected by the failure of the central government to remit required employer contributions to the Fund over the years and the Fund cannot afford the additional cost of doing business stemming from the enactment of P.L. 17-51.”
The Fund and Commonwealth Retirees Association are urging retirees and community members to show their support for the bill and attend the House session on Capital Hill today at 1:30 p.m.
