Tampa’s unorthodox but successful fire and police pension fund draws more national attention
Of all the things Tampa city government does, nothing quite attracts high-profile notice from the national business press like the fire and police pension fund.
The latest clip on the $1.76 billion pension fund comes from the New York Times. An article on the front of the Times’ business section Saturday asked, “Are the trustees of the Tampa firefighters and police officers pension fund out of their minds?”
On one hand, there’s the fund’s unorthodox approach. Just one outside money manager — not the teams of investment professionals and consultants that other many funds use — makes the key decisions about what to buy and sell. That manager, Harold “Jay” Bowen III, president of Bowen, Hanes & Co., in Atlanta, stays away from hedge funds, private equity and speculative bonds, as well as index and mutual funds. Instead, the Tampa fund puts its money largely in stocks, and not a large number of them, and fixed-income investments. This approach, the Times said, “pretty much breaks all the conventional rules of fund management.”
On the other hand, the Times noted, there are the results: Start at the end of Tampa’s 2013 fiscal year and go back 20 years, and the fire and police pension fund’s annualized returns have averaged nearly 9.9 percent. That’s good enough for a ranking in the top 1 percent of public pension funds with more than $1 billion in assets. Since 1974, when Bowen’s father started investing for the Tampa fund, the annualized average tops 12 percent. Those returns make possible uncommonly good pension benefits for the fund’s 3,300-plus beneficiaries. Moreover, the newspaper noted, Bowen’s fees are relatively low, especially compared to big pension funds that use crowds of money managers.
Bowen told Times business reporter James B. Stewart that his approach is to invest in “blue chip companies of the future,” to buy stocks that the market appears to have undervalued, and then to hold them for the long term. About two-thirds of the fund’s portfolio is invested in a total of about 70 to 80 stocks, among them multi-national, “consumer-oriented companies like Unilever and Nestle,” according to the Times. The rest is in fixed-income investments.
“It’s pretty much what Warren Buffett does,” Bowen told the Times. “He’s not diversified, either.”
That’s not the first time that Buffett’s name has come up in connection with the Tampa fund. A year ago, the Wall Street Journal headlined its own story about the fund, “Oracle of Tampa Is a Rare Breed,” a reference to Buffett’s nickname as “the Oracle of Omaha.”
There are skeptics:
• In November, a report from the Pew Charitable Trusts’ American cities project flagged combined numbers from Tampa’s fire and police pension fund and general employees pension fund as a potential fiscal challenge.
• And the New York Times’ article quoted Michael Schlacter, a managing director at Wilshire Associates, an investment consulting and services firm with offices on four continents, as saying, “to assume that one firm is the best in every asset category, especially a small firm that no one around here has ever heard of, is extremely risky. What if a bus hits the senior person?”
But the vice chairman of the fund’s board of trustees, police Detective Richard Griner, told the Tampa Bay Times after the Wall Street Journal story — and reaffirmed on Monday — that the fund’s relationship with and trust in Bowen’s firm is based on performance, and it’s hard to argue with decades of success. At first, the trustees’ intent was not to hire a single manager, said Griner, who investigates major crimes. But as the relationship developed over time, Bowen did such a good job that it became a single management.
“Now it’s 40 years later, and they’ve done a phenomenal job producing numbers that nobody else can produce,” he said.
Nor does Tampa Mayor Bob Buckhorn lose sleep over the fund’s nonconformist approach. While City Hall is monitoring pension costs as it puts together next year’s budget, Buckhorn said he is “very, very comfortable with the way that pension is set up.” He notes that it outperforms the city’s general employees pension fund, which has a range of money managers, all of whom are paid a commission.
“How can they argue with the results?” Buckhorn said of the fire and police pension fund last year. (His spokeswoman confirmed Monday that the mayor has not changed his mind.)
“Ultimately, that’s what it gets down to,” Buckhorn said. “We’ve had a council member or two and get ginned up and try to intervene in that (fire and police) pension, but the results speak for themselves. I wish I had my money invested with him. You can’t argue with it. Sure, it’s unconventional, but if it’s working, why mess with it? And clearly, it’s working. That pension is the model for pensions around the country.”