South Carolina’s Controversial CIO Heads To Private Sector

Robert Borden, the South Carolina Retirement System’s controversial chief investment officer, announced today that he would resign to become a managing partner and chief investment officer at FTA Partners, a multi-family office in Chapel Hill, N.C. that has more than $1 billion in assets. Borden will stay on until February 2012, after which he will be replaced on an interim basis by Hershel Harper, the pension’s deputy chief investment officer.

Borden has sparred publicly with the state treasurer and others about his compensation, his expenses and his proposal to create an independent company to help manage a portion of the pension’s $26 billion in assets. The state’s pension system is underfunded by $13 billion.

As of June 30, the system had 6.8 percent of its assets in private equity, a level that represents about $1.7 billion.

Borden told The State, a South Carolina newspaper, that the current financial crisis will result in “once in a generation investment opportunities. I want to be in a position where I can take advantage of those … and be well compensated for doing it.”

Curtis Loftis, the South Carolina treasurer who had clashed with Borden, told the same paper, “Mr. Borden will be well served by being in private business. … We need to move forward with somebody who is going to be more respectful of the public space.”

Earlier this year, the two wrangled over Borden’s compensation. After it became known that Borden was being pursued for the chief investment officer role at the Virginia Retirement System (a job ultimately won by Ron Schmitz of the Oregon Investment Council), the South Carolina Retirement Investment Commission (on which Loftis sits) voted to raise Borden’s salary to $485,000, a 37 percent increase. A few weeks later, however, Loftis successfully pushed the board to cut Borden’s bonus by $65,000.

Loftis also challenged Borden over his travel and entertainment expenses. “I have been asking questions for the last three or four months, and I’ve not been getting satisfactory answers,” Loftis told The State. Borden did not return calls from Buyouts, peHUB’s sister news magazine, requesting a response.

In 2010, South Carolina came close to laying the groundwork for a state-run independent company that would manage a portion of the pension’s assets. The Borden-led effort aimed to transform South Carolina’s pension system to more closely resemble the Crown Corporation model common to Canadian pension plans. In those plans, the state-run company has greater flexibility in managing assets internally and saves on fees that would otherwise be spent on outside managers. It also would have more freedom in setting compensation levels that are more in line with the private sector.

A study by a consultant hired by the state reported that the plan could save $500 million in fees over the next 10 years, helping the state to reach its investment goals. But after initial approvals by the investment commission, the effort was rejected by then Treasurer Converse Chellis and then Gov. Mark Sanford.

Prior to joining the South Carolina Pension system, Borden was executive director and chief investment officer of the Louisiana State Employees’ Retirement System, where he was credited with modernizing its structure and raising the fund’s performance.

Gregory Roth is a senior editor of Buyouts Magazine. Follow him on Twitter @rothreuters. Follow @Buyouts.