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Pennsylvania PSERS Hires Verus Investments in ‘Emergency’ Move

The public school employees’ retirement system is facing an ongoing federal investigation.

The Pennsylvania Public School Employees’ Retirement System has hired investment consulting and outsourced-CIO firm Verus Investments amid an ongoing federal investigation.

On Tuesday, the PSERS board determined that “circumstances exist to warrant an emergency procurement of an investment consulting firm,” according to a statement disclosing the decision on the pension fund’s website. Verus will provide “monitoring and oversight of investment activities to the board during the pendency of internal and external investigations,” PSERS said. 

The Philadelphia Inquirer reported Tuesday that firm will assume the role of PSERS’ chief investment officer James Grossman while he focuses on the investigation. PSERS, the $62 billion pension fund for Pennsylvania teachers, faces an FBI investigation after its authorization of $13.5 million for the acquisition and demolition of various Harrisburg properties, according to a separate report from the Philadelphia Inquirer

It is unclear whether the firm will serve in addition to PSERS’ other consultants, including Aksia, Aon Investments, and Hamilton Lane Advisors, or replace any of them. Spokespeople from PSERS declined to comment as they continue with the investigation. 

On April 6, the retirement system resolved to hire law firm Pillsbury Winthrop Shaw Pittman, as Institutional Investor previously reported. PSERS also decided to hire Sidley Austin on April 9, according to its website. Both board meeting resolutions said the board sought council “in matters relating to a federal investigation and any collateral issues related thereto.”   

[II Deep Dive: Pennsylvania Pension Fund Turns to SimCorp for Investment Operations Help]

Before the Inquirer’s report on Tuesday, rumors were flying around the cause for the federal investigation. One source of speculation was the board’s announcement on March 12 that it had asked its audit committee to oversee an investigation “surrounding a possible error in the reporting of investment performance results used by the board in its December 3, 2020 certification of contribution rates.”

On March 19, PSERS resolved to hire law firm Womble Bond Dickinson to “conduct a special investigation surrounding the circumstances of the misstatement of the 9-year investment performance used for the shared risk calculation in December 2020,” according to board meeting resolutions

On March 26, the retirement system revealed the error was caused by one of its outside consultants and that it was related to the employee contribution rates reported for fiscal year 2021-22.

A representative from Verus Investments was not available to comment by press time. 

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