Brian Bakst, Associated Press
Head of Minn. retirement fund heads for retirement
- Article by: BRIAN BAKST
- Associated Press
- August 5, 2013 - 11:36 AM
ST. PAUL, Minn. — Wanted: Prudent, investment-savvy individual to manage $65 billion in state assets. Decisions scrutinized by top Minnesota leaders. Results affect pension accounts for thousands of retired public workers.
A nationwide hunt is on for a successor to Howard Bicker, who is leaving his post as State Board of Investment executive director this fall. Bicker has spent more than four decades in the overlooked but important wing of state government, the last 32 years at the helm.
As just one indication of how critical the job is: The state will pay a search firm about $120,000 — the equivalent of a year's salary of the governor — to help find the right person, according to a contract The Associated Press obtained through an open records request.
The goal is to hire a replacement by September, allowing Bicker to ease into retirement when he turns 65 in October. A key challenge is finding a good candidate on a public salary when bigger paydays are out there in private business.
"The profile of these public pension funds has increased significantly," said Keith Brainerd, research director for the National Association of State Retirement Administrators. "A generation ago these pension funds were viewed largely as back-office operations of state and local government — not well-recognized, not well-understood. The dollars involved were much lower than they are now."
Since Bicker took over, the state's portfolio has climbed from not quite $6 billion to $65 billion as of this spring. The portfolio has fallen in value in only six years during tenure, and has grown by 20 percent or more about as many times. The state has averaged a 10 percent annual return since 1980. Until the Legislature capped increases in pension benefits a decade ago, the annual payout bumps usually exceeded inflation and sometimes reached 10 or 11 percent.
Bicker joined the agency in 1971 right after finishing his accounting degree at Winona State University in his hometown.
"I still remember the first day I came in here and saw a guy buy a million dollars' worth of stock and I thought, 'my God,'" Bicker said. "Now, a million dollars is a rounding error for us."
Back then, the state portfolio was largely common stock and bond trades done in-house. Bicker oversaw a transition to more work with outside investment companies who broadened the state's holdings to include more real estate, private equity and venture capital. Today, international stock and other alternative investments drive a healthy portion of Minnesota's fund.
Bicker has juggled the mandate to make money with increasing pressure for socially responsible investing. Minnesota avoided companies operating in South Africa during the apartheid era and those with ties to Sudan and Iran given human rights concerns. Tobacco industry holdings have been restricted. More recently, the board has resisted pressure to cut economic ties to Israel on moral grounds.
Disciplined and direct, Bicker can be found every few months dryly rattling off details about composite indexes, domestic equity asset yields and shareholder proxy resolutions as he presents to an elite four-member board: the governor, attorney general, secretary of state and state auditor.
Associates say Bicker's hard shell hides an affable charm. Mansco Perry, a former deputy who now runs Macalester College's investment office, said Bicker combines investing smarts and common sense.
"He's a fantastic politician," Perry said. "He's much smarter than he would like people to think. He'd like people to think he's just a kid from Winona, Minnesota."
State Auditor Rebecca Otto, a member of the investment board since 2007, said Bicker shows a steadiness and command that make it easier to follow his advice.
"He didn't ever get into the dangerous things that some plans got into around the country. He didn't get into the flavor du jour in terms of investments," Otto said. "So we really didn't bump into some of the problems that other plans got into."
Bicker has navigated stock market tumbles and economic booms. His reluctance to dive deeply into the dot-com offerings when they were all the rage meant Minnesota didn't cash in quick — or get badly burned when the bubble burst.
"I've been accused of being an old fuddy duddy. That's fine," Bicker said. "They can call me whatever they want to call me. We don't chase the new fancy Wall Street stuff everyone wants to play with."
When markets tanked in 2008, Minnesota got nicked some when Lehman Brothers went bust. But Bicker and his team stuck to their investing plan, bought $2 billion in stock near the bottom of the market and, he said, made another $2 billion when things turned around.
Sensitive about having anyone question his ethics, Bicker said he has never bought individual stocks for himself even though nothing would preclude it.
Bicker flirts with luxury. His office walls are filled with photos and art prints of Augusta National Golf Club, Pebble Beach, Royal St. Andrews and other exclusive courses he has played. His salary is roughly $250,000 — one of the rare state officials allowed to exceed the governor's pay — but those in the investment field point out that he could have fetched several times that in a private firm. Even as deputies traded up, Bicker stayed put.
"I said I'd stay here as long as I didn't get bored," he said. "I never got a chance to get bored."
Whether Minnesota can find a replacement with a similar allegiance remains to be seen. By law, the executive director's salary tops out at $327,000. At least seven states, including neighboring Wisconsin, provide bonuses tied to the portfolio's performance. Minnesota doesn't.
Gov. Mark Dayton said he thinks it will be tough to find someone with Bicker's skills and expertise in return for a state salary.
"The question of compensation is one the Board will have to face this fall, after we learn who is interested in the position," Dayton told AP. "I suspect it will show us once again how exceptional Howard Bicker is."
Brainerd, from the national trade association, said if Minnesota officials scrimp it could cost them in the long run.
"My caution is that the folks who are seeking to fill this position not be penny-wise and pound-foolish," he said. "You can quibble over a few dollars of salary and in the meantime potentially miss out on many times that in investment earnings."
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