When Florida's pension managers announce they have beaten their performance benchmarks, they often get a pat on the back from the boss.
Last year, the fund said it had the "greatest return over benchmark'' in 25 years. And in March, as consultants described how the fund had outperformed its benchmarks steadily over time, Gov. Rick Scott chimed in: "That's great.''
In public pension world, a benchmark is the standard that governors and taxpayers use to measure the fund's performance. They also use benchmarks to decide pay packages and bonuses.
The term comes from the marks surveyors chiseled in stone to show the exact latitude and longitude of a location.
But the benchmarks for Florida's pension fund are not etched in stone.
Florida's governor and other elected officials who oversee the pension fund have changed benchmarks more than 25 times since 1985.
Pension consultants say they review benchmarks for various types of investments every few years for "continued appropriateness.''
But critics say benchmark switching can also be a sign that the State Board of Administration, which manages pension investments, is trying to make mediocre returns look better than they are.
"Ambiguity in benchmarking is a common method for covering up underperformance,'' said Rick Ferri, founder of Portfolio Solutions in Troy, Mich. "If a plan keeps changing their benchmarks, or uses complicated and confusing benchmarks, then perhaps those who are questioning performance will go away scratching their heads.''
Mark Hebner, president of Index Fund Advisors in Irvine, Calif., says he thinks Florida's benchmarks are too easy.
"When managers beat easy benchmarks everybody looks good,'' he said.
Sydney P. Freedberg, Times staff writer