Privately Speaking: New Mexico State Investment Council

Seated at a small conference table 11 miles southeast of the art galleries and cafes that line Santa Fe’s downtown – past the vacant motels, the McDonalds and the Jiffy Lube – Vince Smith, deputy state investment officer of the New Mexico State Investment Council, is angry.  

Smith is angry because he believes his predecessors in the state investment office abandoned their sacred fiduciary duty to a state that is thousands of miles away – literally and figuratively – from the economic advantages that benefit financial hubs like New York and Los Angeles. 

But behind that anger, there is pride. 

“I was just reading stories [about New Mexico], and I couldn’t stand it; so I threw in,” says Smith, who speaks with a calm drawl. “When I was in college, I specifically [focused] on public fund management. Fixing things that are broke is what I like to do.” 

The New Mexico State Investment Council certainly was ‘broke’ when it hired Smith and his boss Steven Moise in 2010, shortly after the 2009 discovery of a massive pay-to-play scandal that had torpedoed the $16.6 billion public endowment’s credibility (for more on the scandal, see p. 32). 

With public confidence at a low ebb, the duo knew that fixing the NMSIC – which manages assets from the Land Grant and Severance Tax Funds along with the investments of 17 other government clients – would require a full-bore effort from staff, advisors and the state legislature.  

That effort entailed dramatic changes to the Council’s investment programme, internal governance policies and fund manager contracts. Importantly, it also restored a culture of ethics, something that had apparently been lacking during the pay-to-play years. 

Less than three years later, the NMSIC’s flagship Land Grant Permanent Fund generated a 14.45 percent return for 2012, placing it in the top 15 percent in the country among public funds with $1 billion or greater, according to Wilshire Associates. 

“We moved extremely quickly. I’ve done this [for] 26 years, and public funds don’t move like this,” says Smith. “We’ve done in two, two and a half years what most plans might take five or 10 years to do. Hundred percent turnover in managers, almost 100 percent turnover in consultants; that stuff just doesn’t move that quickly.”