North Carolina to Use Analytics on State Pensions

The North Carolina Department of State Treasurer is implementing software to protect the state’s $70.5 billion portfolio.

The topsy-turvy stock market and the lingering economic fallout has left public employee systems concerned about the long-range outlook for their investment portfolios — and the pensions dependent upon them.

North Carolina is one state that’s planning to use a high-tech solution to look into the future and the present. The state’s Department of State Treasurer announced Thursday, Oct. 27, it will implement customized analytics software to better protect pensions for 850,000 state and local government employees.

The customized software from SAS — which the company says will be made available to all state pension systems — will be able to more efficiently track risks with current and new investments for North Carolina’s $72.8 billion pension portfolio, according to the vendor. The company said its software also will be able to provide more accurate expectations on ROI and volatility.

State Treasurer Janet Cowell said Thursday that the 2008 stock market crash created concern about the state pension and demonstrated a need to track it with analytics software.

“North Carolina’s pension fund normally is very well funded — about 95 percent funded for the state plan and 99 percent for the local plans. So we are a very well funded system,” Cowell said. “It performs well, but everybody had a lot of lessons to learn by the volatility not only in ’08, but since then. And I think there’s been a heightened interest in risk management generally.”

After Cowell assumed office in 2009, the department performed a fiduciary audit, the results of which concluded that there should be a greater focus on risk management.

So the department partnered with North Carolina-based SAS on the two-year, $1.7 million contract announced Thursday. For the duration of the contract, the department will have access to resources and expertise within the company’s Analytics Lab for State and Local Government.

According to SAS, the customized software suite North Carolina will be using includes risk and performance measurement models for fixed-income equity, private markets and hedge funds. It will generate reports and provide dashboards for pension fund portfolio management. In addition, the system includes “data management and workflow processes specific to pension fund assets, and integrates third-party benchmark and market data related to the pension,” according to the vendor. All portfolio and market data will be hosted in the company’s analytics lab.

“The data analytics and granularity of detail, I think, will help us identify those risks and then manage or at least get paid for those risks,” Cowell said. “I think that was a big issue in ’08. People were taking some risks they didn’t realize, and they weren’t being adequately compensated in the marketplace for that.”

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