The $175 Million Rubber Stamp

The latest approval from the Minnesota State Board of Investments

The February 29, 2024 meeting of the Minnesota State Board of Investments was a doozy. Apparently people are fed up with having their pension plan used to fund climate change, unemployment and war.

Public comments on these topics took up nearly half of the meeting time. As always, the SBI and staff listened politely - people are allowed to have their say, but there is no dialogue.

In the midst of the outcry, there were a few things I noticed that seemed to get overlooked. One of the investments approved was $175 million for Oaktree Capital Management’s Real Estate Opportunities Fund IX. The Combined Funds already have $200 million invested in the Oaktree Real Estate Opportunities Fund VIII, so I suppose it seems pretty straightforward.

The SBI seemed to ignore the fact that one of the public speakers is an employee of a business that has been negatively impacted by Oaktree’s management. There were no questions about how our investments might impact the same people whose pensions we are managing.

The SBI also seemed to ignore the fact that our current investment, ROF VIII, has generated third quartile performance, according to Bloomberg’s analysis. Third quartile means our investment performance is closer to the bottom than the top. Well, at least it isn’t fourth quartile.

The SBI also ignored the fact that its former Executive Director, Mansco Perry, is now on the Board of Oaktree as a (paid) outside director. I guess Oaktree is willing to pay former public servants for their stamp of approval, and it seems like a good business decision to do so. Maybe the investment would have been proposed anyhow - but it sure doesn’t hurt to have the ex-CIO faciliating on behalf of Oaktree. The optics are not good, and the write-up from staff made no mention of the relationship.

3rd quartile performance, labor abuses, and undisclosed conflicts - all in one strategy.

All those in favor say “Aye”.