During a recent meeting with Newtown's new pension consultant Fiduciary Investment Advisors (FIA), the Board of Selectmen and members of the Town Pension Committee, one of the committee's   original members, Mark Korotash recalled how the panel originally made its own pension investments.

That is when the local pension fund totaled about $1 million.

In recent years, however, just the cost to administer the local pension and OPEB investments has swelled to nearly half a million dollars - and its performance was, according to local officials and FIA consultants, sub par.

That led to a search for a possible new partner to handle the pension fund investments in favor of jettisoning Westport Advisors, a firm employing Selectman and former first selectman Herb Rosenthal. As a result of that affiliation, Mr Rosenthal has recused himself from participating in any discussion or motions involving the pension fund in order to avoid any appearance of a conflict of interest.

This left local pension trustees, First Selectman Pat Llodra and Selectman Will Rodgers to review the most recent information requested from FIA, the amount of anticipated savings the town might book by switching fund administrators, and ways the town might extract greater dividends from fund investments.

Devon C. Francis, CIMA, represented FIA during the March 7 discussion.

During that meeting, FIA not only revealed how switching from Westport would save taxpayers a little over $200,000 in annual pension fees, but also how changing the way Newtown invests could more quickly reverse years of poor performance for the local fund, which currently is valued at $36,732,195.

During her presentation, Ms Francis kept returning to two significant points - the unusually high fees being assessed against the Newtown Pension Fund by Westport Resources, and the fact that the majority of the investments were, by local policy, being invested into domestic equities.

According to the FIA consultant, the current fund invests less than six percent in international equities, while the current standard is closer to an even split between domestic and international equity funds. FIA is proposing four individual investment managers representing what Ms Francis called "diverse in both their investments and style."

The consultants are recommending the town place:

*32.5 percent of its pension investments across four fixed income funds

*32 percent across four domestic equity funds

*28 percent in three international equity funds

*5 percent in the Cornerstone Patriot real estate fund

*2.5 percent in a natural resources fund administered by Van Eck Global Assets I

Ms Francis explained that the Patriot fund is a private real estate fund with low correlation to traditional assets classes, engaged in building and management, while the natural resources fund would provide modest diversification. She said that if local pension trustees were wary of the real estate fund, she could also recommend a "Global Reach Fund," which she classified as "very diversified."

Returning to the subject of current administrative costs, Ms Francis reiterated that "extra fees" being charged to the pension fund, along with the need to maintain a "less volatile portfolio" with more balance between international and domestic investments.

She said the town currently pays $425,405 in fees, while under the proposal from FIA, the town would pay $232,769.

This prompted Mr Korotash and Pension Committee Chairman Thomas Murtha to make note of certain restrictions on international investing codified in the Town Investment Policy, which the Pension Commission and Westport Resources are currently bound to follow.

Ms Francis then acknowledged that in order for Newtown to subscribe to the proposed investment diversification, the town would need to amend or redraft its pension investment policy. Suggested redraft language provided by FIA also excluded any mention of the local pension trustees as fiduciaries of the fund, to which both the first selectman and Mr Rosenthal objected.

"We would want to keep the [pension committee] as a local touchstone to the community," Mrs Llodra said.

Pension Trustee Charles Farfaglia then asked how often fund management would be reviewed. Ms Francis responded saying FIA provides "full-time due diligence on individual funds and their management," while reporting on all funds quarterly. She did say, however, that in situations that might put investors at undue risk, FIA managers would respond to investors immediately, citing a case where all investors of a particular fund were immediately advised to terminate after that fund's manager departed.

Ms Francis also recommended that Newtown consider changing "custodial" management of the pension from TR Paul, which she said charges $7 per pension payment, to Wells Fargo, which charges $2. Ms Francis said that the total annual cost for Wells Fargo to handle custodial management would be $12,800 , which includes the cost of pension payments.

Since Newtown must go through the process of redrafting its pension investing policy, Mrs Llodra asked that all parties return on April 4 to review proposed new policy language, so selectmen can be prepared to act on that policy change.