State Sen. Jeremy Hutchinson on Wednesday asked on behalf of a client that the trustees of the Arkansas Public Employees Retirement System open a search for an investment manager for the system's Arkansas stock portfolio.
But the trustees decided to delay a decision on Hutchinson's request until its Oct. 25 meeting, after a few trustees said they want more information about their options under state law.
Hutchinson, R-Little Rock, is an attorney representing Ellis Sloan of Searcy, portfolio manager for Kernodle and Katon Tax & Asset Management Group. Sloan once worked for Horrell Capital Management, where he created an Arkansas index fund for the retirement system and managed it for several years. Sloan departed Horrell Capital Management last year for his current employer.
Horrell Capital Management of Little Rock is the current investment manager for the system's Arkansas stock index fund, which totaled $96.1 million as of June 30, according to the system. The firm charges an investment management fee of 0.19 percent of the fund's market value, said Gail Stone, executive director for the retirement system.
Hutchinson made his request to the system's trustees six months after they decided to renew the system's contract with Horrell Capital Management and nine months after Sloan initially asked the trustees to open a search for an investment manager for the Arkansas stock portfolio.
"I personally think there is a legal obligation to do the management search," Hutchinson told the trustees Wednesday. "Part of that ... is subject to interpretation, and other attorneys may disagree."
He said Sloan has agreed to reduce the fee he would charge.
Hutchinson, the nephew of Republican Gov. Asa Hutchinson, said he would like the Office of State Procurement to issue a request for proposals for the investment manager to see "if we can get a bigger bang for our buck."
Dennis Milligan, the state's Republican treasurer and a trustee, initially made a motion to authorize a request for proposals.
During a 20-minute discussion about Hutchinson's request, David Hudson, who is the Sebastian County judge and a trustee, asked, "Why are we having this discussion after having multiple [previous] discussions about this? Is it a consideration that we handled things unjustly? Is that what this is about? Or is it earnings?"
Hutchinson said Sloan considers this a fairness issue.
"But if you can get these same earnings with a reduced management fee, I see no reason why that would be at all a difficult request to ask a board that has fiduciary responsibility" to maximize its earnings, he said.
Hutchinson said Sloan wants a chance to bid on managing the Arkansas stock portfolio.
"If he loses that bid, then so be it," the senator said.
Trustee David Morris, who is the mayor of Searcy, said, "I myself, along with other board members, have confusion in my mind over is it a bidding process? Is it an RFQ, a request for qualifications? Or an RFP, a request for proposal process?
"I am totally confused about some of the statements we heard in the past, statements that were made today," he said.
Then, Morris made a substitute motion for the trustees to delay a decision on Hutchinson's request so the system's staff can research the procurement process and legal issues.
Milligan initially declined to withdraw his motion, but he later withdrew it.
Stone told the trustees that she could have a thorough discussion with Procurement Director Ed Armstrong about the system's options and report to the trustees during their October meeting.
Hudson told Hutchinson, "We want to be fair to you and your client. We want to act in a transparent, honorable and ethical manner," he said.
"I'm just not comfortable acting right now with the level of understanding that I have got," Hudson said.
Metro on 08/18/2016