Candidate to manage NC pension fund returned from Wall Street to his roots

Political pundits have called Dan Blue III a polished, telegenic former investment banker and policy wonk. He is also the son of a powerful political family, politicking since he was knee-high. The 43-year-old is now the Democratic candidate for treasurer seeking to win his first election to public office.

On a recent afternoon campaigning at Chapel Hill’s Carol Woods Retirement Community, all three roles merged. “My first campaign was for Howard Lee,” Blue said and smiled. Lee was Chapel Hill mayor in the early 1970s and the first elected African-American mayor of any predominantly white Southern city. “I was at the tender age of 3 or 4, and my first political words were, ‘You and me and Howard Lee.’ 

The Carol Woods auditorium filled with laughter.

The son of Dan Blue Jr., North Carolina’s first African-American House speaker and current Senate minority leader, Blue III is running against Republican Dale Folwell, former House speaker pro tempore and former Employment Security Division chief under Gov. Pat McCrory. Pollsters are calling the race a toss-up. Two-term incumbent Democrat Janet Cowell decided not to run again for treasurer.

“It is an amazing amount of power sitting in a quiet place that most people don’t think about,” Blue said about the treasurer’s office in an interview after the Carol Woods event.

Blue grew up in Raleigh and moved to New York City to trade in the pharmaceutical, biotechnology and diagnostic industries at now-defunct Bear Stearns.

“If you grow up in a place like North Carolina, you might enjoy Central Park,” Blue said. “But it’s not like having a stream running through your backyard, or any of the other natural beauty we have here.”

Driven by his family’s commitment to public service and his mother urging him to settle down, he said, Blue returned home in 2004. With an entrepreneurial side sharpened by Wall Street, he launched the Pharmaceutical Institute, which provides specialized pharmaceutical and biotechnology training.

John Campbell, a self-described Raleigh serial entrepreneur who launched the Pharmaceutical Institute with Blue, first met him 25 years ago when they interned together at Glaxo Wellcome.

“We collaborated on (the Pharmaceutical Institute) but beyond the napkin the guy is a genius,” Campbell said in a reference to implementation of ideas sketched on the back of a napkin. “The way he sized up the market and built the product. People also kept telling us we needed to do it offshore. But Dan said, ‘No, do it in North Carolina.’ 

Most recently Blue has led his family law firm’s bond practice supporting state funding of infrastructure projects. He’s also served as Wake County Democratic Party chairman and as a panelist on the NC SPIN public affairs TV program.

Brian Fitzsimmons, the current Wake County Democratic Party chairman, has known Blue since 2008. “Dan is like my Obi-Wan,” Fitzsimmons said. “He has always been the guy that taught me everything I know. There’s this air about him, like the prototypical old soul, quiet and reserved. But when it comes to taking control, he’s methodical and confident.”

Wall Street ties

Blue’s Wall Street background has brought criticism. In the Democratic primary, opponent Ron Elmer slammed him for holding a New York City campaign fundraiser, denouncing it as “a quick payout from Wall Street.”

“Dale Folwell will be a treasurer for North Carolina, not for Wall Street,” said Ardis Watkins, SEANC legislative affairs director. SEANC endorsed Folwell, considered a major boost to his campaign given SEANC’s tendency to endorse Democrats.

Blue has received endorsements from Cowell, the N.C. Association of Educators, the North Carolina AFL-CIO, the N.C. League of Conservation Voters, the Sierra Club, N.C. Advocates for Justice and the National Organization for Women PAC.

Cowell came under fire earlier this year for joining two corporate boards while still serving as treasurer. Folwell quickly pledged that if elected he wouldn’t join any private-sector boards. Blue initially dodged the issue, before making the same pledge. He has also said he does not believe Cowell’s presence on corporate boards influences her decisions on the state pension fund.

With his high finance, health care and legal background, Blue said he is qualified to serve as the next state treasurer and manage the state’s $90 billion state employee pension plan.

Over the past 10 years, pension fund management fees have increased nearly 1,000 percent, according to reporting by WRAL. A treasurer’s office report for the 2015 fiscal year cited $513 million in financial management service fees.

Watkins calls it “price-gouging” by Wall Street money managers. She argues the treasurer’s office is not only wasting pension funds on exorbitant fees, but also receiving poor returns on risky investments. Blue vows to cut outside fees.

“We can find better deals and perhaps not use a middleman,” Blue said.

During the primary Elmer was skeptical outside managers added any value to the fund and proposed shifting its alternative investments into basic stock and bond index funds overseen in house. Other major U.S. pensions have recently made similar changes.

Blue supports embracing index funds and bringing more management in house, but overall does not expect to significantly change the pension plan’s stock portfolio.

He also said state employees should know where their pension funds are invested. Many current treasury management contracts prohibit sharing such information and Blue pledges to renegotiate contracts for greater transparency.

Managing the funds

Funding for the pension fund is based on a 7.25 percent assumed rate of return, which has not been achieved in years. Blue believes it should be lowered, provided it is done gradually — such as a periodic drop of a quarter of a percentage point.

Blue has cautioned that a rate of return too low would make taxpayers pay more than they should. Too high and it defers the shortfall to future generations. “You want to make sure that you get the right number,” he has said.

North Carolina is one of just a handful of states where an individual, in this case the treasurer, serves as the sole trustee of such a massive pension fund. Suggestions have been made that a board of directors should serve as another layer of oversight. Blue is wary of this and has stated he fears too much politics would creep into what must be a long-term thinking process.

Blue has several proposals to cut costs in the state’s $3 billion health plan, including shifting the plan’s focus to preventive medicine. New financial or other incentives can also encourage plan members to exercise more, eat better and have routine checkups, he said.

He wants the plan to aggressively assist patients with treatable conditions like high cholesterol or diabetes before they become worse.

Blue said he feels positive about North Carolina’s fiscal situation. The state has healthy revenue streams and adequate reserves for times of crisis, he said. He cautioned that several years of austerity budgets have brought down taxes but left infrastructure and education needing more attention.

Concluding his remarks at the Carol Woods Retirement Community, Blue framed the treasurer’s office in a broader moral context. “What we do touches all levels of society,” he said.

Dan Blue III

Age: 43

Education: Law degree, MBA and bachelor’s degree in biomedical engineering from Duke University

Professional experience: Attorney at Blue LLP; former investment banker at Bear Stearns; former executive director of the Pharmaceutical Institute

Political resume: Former chairman of the Wake County Democratic Party

Family: Married to Traci Blue; two children

Website: bluefornc.com

Duties of the treasurer

The job’s primary duties entail managing North Carolina’s $90 billion pension plan — the 26th largest pension fund in the world according to the treasurer’s office — and administering the $3 billion annual state health plan, which provides for more than 700,000 teachers, state employees and retirees and their dependents. The treasurer is also a member of numerous state boards and commissions, including the Local Government Commission, which reviews proposed debt by cities and counties, in addition to the State Banking Commission and Board of Education. The salary is $127,561.


With no incumbent, the treasurer’s race is attracting significant money. In this year’s second quarter, Dan Blue III raised $216,499 while Dale Folwell brought in $164,499. Folwell, however, ended the period with more than three times the amount of cash on hand as Blue.