Nov. 13–N.C. Treasurer Richard Moore has ordered a review of the state pension plan’s business with Alliance Capital Management, which faces allegations of improper mutual fund trading.
Moore has asked his chief investment adviser to look at whether probes by the Securities and Exchange Commission and New York’s attorney general have affected the stock portfolio Alliance manages for the state, which was valued at $6.4 billion as of June 30.
He also wants to know what steps the New York-based investment firm is taking to improve regulatory compliance.
Moore said it’s possible the state could cancel its Alliance contract, but doesn’t plan any hasty actions. He said he has been encouraged by Alliance’s response to the mutual fund investigations, including the ouster this week of two top officials. The state’s money with Alliance is in separately managed accounts, not mutual funds.
“If the firm has serious structural problems, we’ll cross that bridge when we get to it,” said Moore, who has sole fiduciary responsibility for the state’s pension fund. “It’s way too early.”
A spokesman for Alliance declined to comment Wednesday. The company has said it is cooperating with regulators, who are investigating alleged improper market-timing transactions in the company’s mutual funds.
Alliance is one of many companies involved in a wide-ranging investigation of the $7 trillion mutual fund industry.
In North Carolina, Alliance is one of 19 investment firms that manage the state retirement system’s stock portfolio, valued at $28 billion on June 30. The state manages its own bond investments, which make up the rest of the $55.7 billion pension fund. It provides benefits to state and local government employees, teachers, police, firefighters, lawmakers and judges.
Another company under investigation that does business with the state is Bank of America Corp, which manages $2.3 billion for the pension fund. In September, the Charlotte-based bank was named in a complaint New York Attorney General Eliot Spitzer lodged against a hedge fund, but it has not been charged with wrongdoing. A former Bank of America broker has been charged with fraud in the mutual fund trading case, and other officials have been dismissed.
Moore said his office has had conversations with bank officials, but he has not ordered an official review. Unlike Alliance, Bank of America makes no active investment decisions for the state; instead, it manages accounts pegged to stock market indices.
Moore also said he recently talked with Bank of America Chairman and Chief Executive Ken Lewis at a conference about the state’s investments. “Right now I have confidence Bank of America has addressed the issues it had,” Moore said.
The state pension fund has done business with Alliance since 1987. As part of his office’s review, Moore said he wants to know whether portfolio managers that monitor state investments will have an increased workload because of the regulatory probes. He also wants to know how high up the problems are in the organization.
Moore’s chief investment adviser, Andy Silton, said his review will likely take until mid-December and that the company has cooperated. He is working to schedule a meeting with Alliance officials.
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