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Merrill Lynch got $3.8M commission in 10 years
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Posted on Jul 21 2011
The NMI Retirement Fund’s former investment consultant, Merrill Lynch, received a total of $3.8 million in commissions during the 10-year period it served the Commonwealth’s pension program.
Responding to a Saipan Tribune Open Government Act request, Fund administrator Richard Villagomez disclosed yesterday that Merrill Lynch was paid a total of $3,797,124 in commissions as chief adviser for the Fund’s investment portfolio.
It advised the Fund board on long-term investment strategies, allocation of assets, types and extent of long-term risks the Fund should be exposed to, management of risks, and the selection, monitoring, and retention of outside investment managers.
Merrill Lynch ended its service with the Fund in October 2010; it was replaced by Wilshire Associates.
Villagomez said that Merrill Lynch’s cumulative $3.8 million commission covered fiscal years 2000 through 2009. A part of the fee, $1,079,351, represents the investment consultant’s fee for the period. Merrill Lynch was also paid $135,534 as investment consultant fee in fiscal year 2010, Villagomez said.
The former consultant was paid at 3 basis points or .0003 percent of 1 percent of the total value of the portfolio being handled.
He refused to disclose other financial information and transactions made with Merrill Lynch due to the ongoing litigation.
The Fund is suing Merrill Lynch for allegedly providing the board of trustees defective investment advice that resulted in a significant loss in the pension portfolio of retirees, amounting to almost $150 million in 2009 alone.
Because the former consultant received compensation in “soft dollars” up until at least the end of June 2009, this created a conflict of interest, the Fund said. “Soft dollar” compensation is based on trade commissions that exceed the compensation it would receive under a “hard dollar” arrangement.
Merrill Lynch is being sued for breach of trust, breach of fiduciary duty, negligence, malpractice, and unjust enrichment.
