I recently criticized Georgia for being the only state to prohibit its public pension system from investing in alternative assets like venture capital and private equity. One thing I really wanted to know was if pension system officials were supportive of the ban, or if they’d advoated for a change. Sadly, I was unable to get anyone willing to comment on such matters.
Today, however, I received a call from W. Daniel Ebersole, director of the Georgia Office of Treasury and Fiscal Services (he apparently was on vacation earlier this week). Ebersole said that he strongly supports a policy change, because a “modest asset allocation to alternative investments would enhance our performance through diversification.”
Moreover, such a proposal has reached the Georgia legislature twice in the past five years, and was supported by the state senate. Unfortunately, it was twice opposed by the state house (one time not even coming up for a vote). Ebersole says that opponents believe such an allocation change would be “too risky,” even though the proposals had a 5% target allocation that would be phased in no more than 1% per year.
Too bad Ebersole’s side is losing on this, particularly given that the opposition is based on unfounded fears. The only silver lining is that, not too long ago, states like Tennessee, Maine and New Jersey also prohibited such investments, and they’ve since changed their policies. Georgia hopefully won’t want to remain an outlier indefinitely, for the sake of its retirees.