Matthew Cunningham-Cook: Firms That Backed Gov. Charlie Baker’s Pro-Charter Initiative Scored Millions In Contracts With Massachusetts Pension Fund
In the Intercept, Cunningham-Cook reports that the same investment firms that backed Baker’s 2016 charter school initiative have since made a bundle from state contracts.
In the 2016 election, executives at high-fee, high-risk investment firms poured cash into a Massachusetts pro-charter school initiative championed by Gov. Charlie Baker. In the years since, those investment firms have reaped a total of $320 million in new lucrative investment management contracts with the state pension fund.
The Massachusetts Pension Reserve Investment Management Board, which oversees more than $74 billion in assets covering 300,000 beneficiaries, frequently touts its investment performance that helps to provide $1 billion in benefits annually. Baker sits on the MassPRIM Board via a designee and appoints two additional members.
A comparison of the pension fund’s return to a straight and simple 70/30 portfolio — wherein 70 percent is allocated toward the S&P 500 and 30 percent goes to a blue-chip bond index fund — reveals underperformance, with the pension returning 10.4 percent annualized for the five years ending December 31, 2020, and the index fund returning 11.58 percent, costing the commonwealth of Massachusetts, its taxpayers, and active and retired public employees more than $5 billion over that period.
Those trailing returns come as the pension fund has made hundreds of millions of dollars in new commitments to high-risk, high-fee, low-transparency “alternative investments” like private equity, private real estate, and hedge funds — including to those managers whose executives donated to Baker and his pro-charter school campaign. Financial reports show that some of those managers may have subpar performance, dragging down MassPRIM returns and forcing taxpayers to contribute more into the funds. Viewed as a whole, the new investments raise the question of whether money managers with political connections were able to reap benefits regardless of their investment performance.