When Brad Briner left his post as co-CIO for Michael Bloomberg’s family office to run for Treasurer of North Carolina, his friends thought he might be going through a mid-life crisis.
The ex-Willett Advisors investment chief stressed that is not the case. He said he's running to become North Carolina’s Treasurer, which oversees the $118.7 billion pension fund, in a bid to improve the plan’s investments and its structure. He is running on the Republican ticket, facing down two other candidates in the primary election on March 5.
“I wanted to figure out how to give back,” Briner said of his decision to run. “A lot of people invested a lot in me over the past 12 years. I wanted to share those skills I picked up more broadly.”
North Carolina’s pension plan could use more investment prowess: For the three- and five-year periods ending June 2022, the plan ranked dead last across 50 state retirement systems.
Under current treasurer Dale Folwell, who is now running for governor of North Carolina, the pension fund cut back its exposure to private equity, real estate, and hedge funds. He also launched an in-house index fund, which now manages $18 billion internally. As a result of this work, North Carolina pays the lowest total fees among state pension funds.
But, Briner pointed out, that comes at a cost. The fund’s total allocation to private equity — which has been a top-performing asset class for many pension funds — is 5.41 percent of the total portfolio, lower even than the fund’s modest 7 percent target allocation.
The fund’s 37 percent allocation to cash and government bonds is also hindering it, Briner said. In his view, that worked under the state’s long-serving Treasurer, Harlan Boyle, who presided over the pension plan through the 1980s.
The state legislature has capped the amount the pension can hold in certain assets like real estate and non-investment grade fixed income — but Briner doesn't believe that's an obstacle to improvement.
“There's a lot of low hanging fruit to pick in terms of performance from bottom to middle,” Briner said. North Carolina may, for example, look to add exposure to real assets. After stints at the University of North Carolina’s endowment and Morgan Creek Capital Management, Briner spent several years as director of real assets at Willett.
Because Briner is running on the Republican ticket, ESG and diversity and inclusion naturally come up as campaign issues. The state already passed rules that prevent state funds from considering non-fiduciary factors when making investments. “I don’t disagree with that,” he said. “I think it’s the right approach.”
By way of example, Briner pointed to renewable versus traditional energy prices: At their peak, green energy businesses were trading at 100 times revenue, while traditional oil and gas companies were trading at three times net income. “As a fiduciary, you want to be in a traditional energy business,” he argues.
Briner wants to change the state pension's governance model. North Carolina is one of the three remaining states that use a sole fiduciary model of pension fund management. In other words, the state treasurer — an elected official — has the sole power to make investment decisions on behalf of the pension fund. Most state pension funds either delegate that authority to their boards or directly to the investment teams.
“It's not so much that the sole fiduciary can yank the tiller hard one way or another,” Briner said. “It's that a different fiduciary almost certainly will.”
If elected, Briner would need legislative support to make any governance changes. But, he added, he wants to find a solution that “respects the power of the voters,” adding that North Carolina elects more state cabinet positions than nearly every other state. If the state does make changes, it would follow in the footsteps of Michigan, which was one of the few holdouts with respect to this governance model. In 2018, the state moved fiduciary duty from its treasurer to a board.
Although moving into a public role after years in the intensely private family office world will be a big change, Briner said he is up for the challenge.
“It's big, it’s important, it’s imminently solvable, and there are people we can look to who are alive and well and can help us think it through,” Briner said, pointing to Ash Williams, former CIO of the Florida State Board of Administration, who is now vice chair of J.P. Morgan Asset Management, and Nicolai Tangen, CEO of Norges Bank Investment Management.
“Those are two who come to mind,” he said. “I'm fortunate that I can do this. I have the skills to do this, and I find it to be a lot of fun.”
