Mansco Perry beats the benchmarks at Minnesota investment board

It's a good bet that Mansco Perry won't have to worry about his job when new members take over at the Minnesota State Board of Investment (SBI) in January.

Perry, executive director and chief investment officer of the SBI, oversees nearly $100 billion in public-employee retirement and other state funds. His board consists of the governor and three other state officials. And Perry has posted a superior long-term investment record over the last five years.

"I learned from Howard Bicker," Perry said of his longtime predecessor who retired in 2013. "Keep it simple. Focus on the long-term [asset-allocation] approach. I've been in the investment industry for 30 years and there's always a plethora of new ideas and products.

"An investor can really only do two things," said Perry, 65, who has worked in the private and public sectors for 40-plus years. "I can own assets or lend money. You want to own things that give you a solid return, or lend money to entities that [pay back], plus an appropriate return for the risk you took."

It's worked out well so far on Perry's watch. And he will explain the strategy in January to incoming Gov. Tim Walz and the other board members.

Perry, a good math student as a youth who learned statistics studying his baseball-card collection, grew up in Newark, N.J.

His mom cleaned houses and his dad worked in factories. He graduated from Carleton College and earned an MBA from the University of Chicago before joining Cargill and later, Target Corp, in financial-analysis positions. He also has a law degree and is a chartered financial analyst.

"There's zero capital required," Perry quipped. "You sell tables, pay the rent and charge people to come in."

He joined the Minnesota Revenue Department in 1987, before joining Bicker at SBI in 1990.

The SBI's single-largest bucket of money is the so-called "combined funds" of nearly $70 billion local-and-state retirement plan assets.

The overall SBI combined-funds return across all asset classes, including stocks, bonds and private-equity investments, was 9.5 percent over the five-year period ended June 30, the end of the state's 2018 fiscal year. It was 7.8 percent over the past decade under Perry and Bicker.

Those overall returns made Minnesota SBI the eighth-best performing state for investment performance.

The long-term trick is an asset-allocation model that provides sufficient exposure to growth areas, as well as diversification, partly in order to generate sufficient income to meet annual obligations. Perry has done that in several ways.

The single-biggest chunk of assets, about 60 percent of the combined funds, has been invested in public stocks, which returned 11.5 percent over the last five years.

Moreover, Perry has moved gradually to less-costly passive and index investing over more-expensive actively managed funds, and he pushed down the fees paid to active-fund managers, who buy and sell stocks more, to less than 0.5 percent of assets. Perry also has negotiated more five-year contracts with money managers who don't get paid anything unless the state makes something.

"It pays to be big," said Perry, who has used the SBI's size to cut better deals. "We generally have had a larger number of active managers. We're moving more to index investing."

Perry has increased exposure to private-equity investment to nearly 14 percent. And he has permission from his board to go as high as 25 percent. Private-equity investments returned 15.5 percent annually, the best return, to Minnesota pensioners over the past five years.

KKR also bought and is expanding Minnesota-based Fleet Farm. And, with exception of a few bad actors who have looted their targets, most private-equity managers invest for growth. Perry also has negotiated down traditional 2 percent management fees, as well as the traditional 20 percent of long-term gains.

"The overall rack rate [for private-equity managers]" has gone down," Perry said.

Perry oversees a staff of 23, down one from when he took over the department in 2013. They oversee contracts and relationships with about 100 money managers, and invest a relatively small amount of themselves. He has returned about $1 million of his $6 million budget annually to the state.

Perry, an unassuming, analytical guy with a wry sense of humor, had left SBI in 2008. He was hired to run Maryland's pension funds for $240,000, a nice bump from the $130,000 he was paid as assistant director in Minnesota. Bicker supported him. Perry commuted to Maryland, while his family remained in suburban St. Paul.

Perry returned to the Twin Cities in 2010 to take the top investment job at Macalester College.

That's a big number for most working folks, but not compared to the seven-figure paydays often raked in by private-sector money managers. And the taxpayers and pensioners have earned a pretty good return from Perry and his crew.

"Mansco is a long-term strategic investor and doesn't get rattled by short-term volatility," said Kerry Brick, the pension investment manager at Cargill and a member of SBI's investment advisory board. "He and Howard think somewhat alike. and the SBI also has been well run. Mansco is always well researched and thoughtful. He's a good fiduciary and steward of the public employee pension dollars and the taxpayers' dollars."

Staff writer Patrick Kennedy contributed to this report