It was not lost on local officials that in a 20-year window, Newtown’s pension investments have met a benchmark goal set by local policies. It was the last five years that have prompted a call for hiring a pension consultant.

After meeting with Finance Director Robert Tait and Pension Committee Chairman Thomas Murtha on May 18, the Board of Selectmen unanimously agreed to hire a consultant that Mr Tait said would focus on several key tasks, including analyzing the pension fund; its mix of investments; the town’s pension policy; and the current benchmark of performance tied to that policy.

The finance director told The Newtown Bee following the meeting that one of the most important things a consultant would determine is whether that current investment performance benchmark is appropriate.

“We should determine for a $36 million pension fund, how many potential investment managers we need,” he said. “Then we’d like them to help us facilitate an RFP [Request For Proposal] process to solicit potential investment managers.”

It was revealed during Monday’s selectmen meeting that Newtown would have enjoyed a $6 million increase to the pension fund balance if investments had met the benchmark assigned by town policy.

“The town’s sole investment manager [Westport Resources] agreed that our benchmark is conservative, but other investors have met that same benchmark,” Mr Tait said. “It’s not like it was an unattainable goal.”

For nearly three of the past five years, as the town’s pension investments have drifted between a negative 2.5 and negative 6.1 percentage difference between the portfolio and benchmark, local officials have been suggesting perhaps the Pension Committee should seek cost proposals from other potential fund managers. 

Sole Municipal Client

Mr Tait said Westport Resources has been managing Newtown’s pension for many years, and it is the sole municipal pension fund the company handles. He further said that Westport Resources is primarily concerned with investing for personal wealth management.

The finance director said most other Connecticut municipalities retain multiple pension investment managers. In Mr Tait’s previous job in Meriden, that city’s $150 million fund retained as many as ten different investment managers.

“And after one to three years,” Mr Tait said, “if that manager’s investments were not performing well, they were out.”

He said there are other advantages to hiring a pension consultant. That individual or firm would be able to analyze long-term past performance of any firms the town was considering hiring, and that consultant could be retained to perform an annual review of any or all future town pension investment managers.

When asked the potential cost for such a consultant during the May 18 selectmen’s meeting, Mr Murtha said the retainer could run as high as $35,000, but Mr Tait suggested it would likely be less.

“I don’t think it will cost us that much,” Mr Tait said.

He said the current pension is “close to fully funded,” despite the recent lower than desired investment performance, but having the additional $6 million that benchmark performance would have brought, “would have brought us much closer to being fully funded.”

If the town’s pension is fully funded — that means at any given time, if the town was to cease functioning — the current pension fund would have enough money to carry all existing pensioners to the limit of the fund’s actuarial “mortality guidelines.”

He told selectmen that an RFP would also give officials a means of comparing whether fees being paid to Westport Resources are comparable to the current investors market retainers. 

Growing Impatient

First Selectman Pat Llodra appeared to be growing more impatient about the most recent investment performance.

“Why are we struggling to make that benchmark?” the first selectman asked Mr Murtha and Pension Committee member Mark Korotash. “Why are we not making the [investment] numbers that are being made in other communities? We can’t continue to go on this way.”

Mrs Llodra said if a consultant pins down a reason for Westport’s poor investment performance, “we need to fix it. And if there’s no reason, we need to go forward with a new RFP.”

Selectman James Gaston said Newtown should also be prepared to look at other municipal investment policies to see if Newtown’s are appropriate.

Mr Murtha said that Newtown’s fund managers have suggested investing in “lower bonds with higher returns.”

“They claim we’ve tied their hands,” the pension committee chairman said. “In the last few years we’ve lowered the benchmark, and that costs a lot of money.”

Mr Murtha told selectmen nonetheless, that his committee will likely suggest a further downward adjustment to the benchmark of about a quarter percent in July. He said the committee’s actuary has recommended reducing the expected rate of return by 25 basis points, to seven percent.

“If the benchmark is appropriate, and we haven’t met it in five years, that has cost us $6 million in five years,” Mrs Llodra said, before requesting and receiving a motion to hire the pension consultant.