SFR: You’re new on the job, and the state Legislature has changed the makeup of the SIC board to take power from the governor. What should the public know about the new SIC?
SM: I want the public to know that our goal is to restore its trust in the mission of the State Investment Office.
Do you share several board members’ concerns about state Attorney General Gary King’s pace to recover money lost in ‘pay to play’ investments?
I have met with Gary three times since April 1, most recently [on May 12]. He is willing and anxious to help us pursue recoveries.
Have institutional investors been Wall Street’s suckers all these years?
I don’t know.
What would you call it? For years, Wall Street hosted conferences on how [subprime mortgage securities] worked, with representatives of state pension and investment funds going and being told what a great deal these [products] were; a few years later it blows up, and it turns out Wall Street was short-selling those same investments, knowing they were no good.
What I’m trying to do is answer your question thoughtfully. I don’t know whether institutional investors took the word of Wall Street, so to speak, or whether they drilled down, analyzed these investments thoroughly and made thoughtful decisions based on their own analysis. It would appear those comments have some validity. But I don’t know what they did or not. Neither do you. We don’t know. It makes us think twice about what we all invest in.
Who is responsible for determining whether outside investment consultants are free from conflicts of interest?
We are. The staff is. And the Council is responsible for making sure that the staff does its job properly…
Sixty percent of the SIC’s portfolio is in equities. With the shakiness in the stock market, is that appropriate?
We are now doing a study so we can present to the Council on May 25 a new asset allocation model. That number will be reduced. We need more of a focus in the international arena. We might see more of it going there. We might see more of it going into fixed-income investments [such as government bonds], to create more of a defensive posture.
Some foreign stock exchanges make Wall Street look like the tightest-run ship you’ve ever seen.
I think the well-informed investment professionals who are advocating for an increase in the international sector are comfortable with the strength of the companies whose stocks they might want us to buy.
How important is it to look back and figure out what happened?
I think it’s important. He who knows only his own generation remains only a child.