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The San Diego County Employees Retirement Association is knee-deep in controversy, fending off allegations by whistleblower Jeffrey Baker, a former staffer who has alleged he was wrongly terminated after going public with fears that the agency was taking risks with its investment funds.

But it's not a lack of transparency that's troubling the county employee pension fund, at least according to a piece in the 2011 winter issue of aiCIO Magazine, published by Asset International and targeted to institutional chief investment officers.

Headlined, "Is Transparency Killing San Diego?" the story by Kip McDaniel, begins by saying, "Sunshine is the best disinfectant. It also causes sunstroke."

"The San Diego Country Employees Retirement Association (SDCERA) probably receives more negative attention than all other Southern Californian pension funds combined—from this magazine, as well as local and national news organizations.

"Yet, is it the fund's attempts at good governance, and not poor investment decisions, that are causing its problems?"

"Yes, investment employees have invited criticism that would exist regardless of this transparency," McDaniel notes. "Outsourced chief investment officer Lee Partridge has garnered some vitriol from outside skeptics and internal staff—specifically, Lisa Needle, who recently departed the pension for hedge fund consultancy Albourne Partners.

"Another employee was recently fired after (but not because of, according to a SDCERA spokesperson) going public with accusations that the fund had breached risk budgets."

But what's really causing big problems is free and easy public information, McDaniel argues: "The difference between SDCERA and other public funds is its transparency, which manifests with the fund posting video of its board meetings on its website."

"Combine this with a relatively contentious local political environment in conservative San Diego and a board susceptible to public pressure, and you have a recipe for—well, an SDCERA-type problem."

The story quotes an anonymous pension "governance guru" as saying, "Greater transparency which causes problems, or great transparency alone, is insufficient to have a well-functioning system. Transparency alone doesn't fix things.”

According to the anonymous experts cited by McDaniel, "the true problem [in San Diego] lies with the board—not the levels of transparency the fund provides an interested public.

"With a majority of board members being non-experts, and many being voted in and taken out at the behest of a segment of the public, providing transparency is a half-measure that misses the mark and can, in fact, make the job of managing billions of dollars in retirement capital more difficult."

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