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For smaller corporate pension plans, the perennial challenge is how to create a diversified and sophisticated portfolio without a billion-dollar calling card.
Ronald Meyers, head of Idaho Power Co.s pension plan, says one of his primary advantages in making that happen is the 25 years he has spent overseeing the $475 million defined benefit plan. His long tenure, through several punishing market cycles, has given him perspective and skepticism about what managers can and cant achieve. Meyers, who has spent a total of 32 years with the 2,100-person Boise-based company in areas such as accounting and treasury, says a key to the plans success is the level of due diligence he has been able to do on its external managers. We visit these guys, sit down and talk to them, he says. Weve found value in getting to know the people, and weve been able to pick up on problems early. Even though he works for a small plan, Meyers says hes been able to tap into top managers: We have reasonably good access.
Idaho Power earned an average of 8.13 percent annually for the three-year period ended December 31, 2012. Last year it was up 12.8 percent, compared with the 11.5 percent an indexed version of its portfolio would have returned. The Idaho Power pension has come a long way from its early days. When Meyers took the job as pension and investment administrator, the plan had just three managers: One oversaw a balanced mandate, one picked value stocks, and one managed the bond portion of the plan. Over the years, Meyers has added small-cap equities, international and real estate. In the mid-1990s he began investing in core real estate, and later in the decade the plan was rebalanced into value, saving the portfolio from much of the carnage wrought by technology stocks. More recently, he added midcap equities, emerging markets and small-cap international, as well as small allocations to commodities, absolute-return funds of hedge funds and private equity. Julie Segal