Posted on: Friday, January 17, 2003
OHA takes new investment approach
By Vicki Viotti
Advertiser Staff Writer
In a move aimed at stemming recent losses in the stock market, Office of Hawaiian Affairs trustees yesterday voted to change the agency's investment management team and give it more freedom to respond quickly to changes on Wall Street.
The change comes in the wake of an upheaval on the board over the decrease in OHA's portfolio value from about $330 million two years ago to a current value of about $260 million, said trustee Oswald Stender, chairman of the budget and finance committee.
OHA's board of trustees approved a plan to split the management of its investment portfolio between Frank Russell Co. and Goldman Sachs. The one-year contract will begin March 1, giving the trustees time to establish investment policies the companies will use as guidelines.
The money OHA will pay its management team will be based on performance of the portfolio, not on a set fee as it is now.
In addition, trustees had asked the companies to submit proposals for a "manager-of-managers" service, an arrangement in which OHA contracts with a single top manager who then has the authority to hire and fire individual money managers as market conditions change. Salomon Smith Barney, which has overseen the portfolio for the past two years, also submitted a proposal that the board rejected.
The switch is less a condemnation of Salomon than of the OHA board's former system of lengthy approval procedures that make "proactive" dealings with Wall Street impossible, said Joan Bolte, OHA's chief financial officer.
In most categories, investments performed about the same as the market as a whole, Bolte said. But in the higher-risk, "small cap" funds, "when we took losses, we took heavier losses than others did," she said.
Stender said OHA trustees will revise the investment guidelines over the next few weeks. The board wants to move about 15 percent of the money into real estate, he said.
Trustee Rowena Akana — who has been critical of Stender on the investments issue as well as on the recent failure of his committee to close a deal accepting a gift of land in Ma'ili — quizzed Stender during the meeting on potential conflicts of interest. Stender knows employees of Goldman Sachs because of their work handling investments for the Kamehameha Schools, where he formerly served as a trustee.
However, Stender said he has no personal investments handled by Goldman Sachs and doesn't see his familiarity with the firm as a problem.
After the meeting, Stender admitted he didn't realize there was a pressing deadline in reviewing and accepting the donation of 200 acres in Ma'ili. The land was sold when the OHA board didn't move fast enough to study the property and accept it.
He said the board's streamlined committee structure will allow fewer things to slip through the cracks.
