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From Eagles tight end to pension investor, John Spagnola works for the longball investor

John Spagnola, the Philadelphia Eagles' star tight end and players' union rep in the 1980s, has built a post-NFL career as paid advisor to public-employer and union pension plans in Pennsylvania, which has more publicly funded retirement plans than anywhere.

John Spagnola, former Philadelphia Eagles and Yale football star, is now a managing director at PFM, which advises town and union pension funds.
John Spagnola, former Philadelphia Eagles and Yale football star, is now a managing director at PFM, which advises town and union pension funds.Read more

John Spagnola, the Philadelphia Eagles' star tight end and players' union rep in the 1980s, has built a post-NFL career as paid advisor to public-employer and union pension plans in Pennsylvania, which has more publicly funded retirement plans than anywhere.

He is a managing director at Philadelphia-based PFM, a municipal finance consultant, with 530 employees nationwide, which ranks among the largest pension advisors firms.

Clients include 82 Pennsylvania towns and agencies (West Chester and Upper Moreland, among others), SEPTA, and, recently, PGW. National clients include the NFL and the Port Authority of New York and New Jersey.

"They've been on board for a long time," Rob Loughery, chairman of the Bucks County Commissioners, said. The county's $650 million pension system is managed by more than 20 outside stock, bond, and "alternative investment" managers, chosen on PFM's recommendation. Loughery calls the yearly charge of around $90,000, or 0.15 percent, a bargain, "for the guidance they give us." (The managers charge extra.) "We may be the only county in the commonwealth that's created our own venture capital fund," with state-backed Ben Franklin Technology Partners," Loughery added. "PFM did the analysis for us, and showed us what we should consider, and the risks."

Bucks' pension investments lost 0.3 percent last year, better than Philadelphia's 3.1 percent loss, a little behind Montgomery County's 0.6 percent gain. Bucks has consistently run behind Montgomery and ahead of Philadelphia in recent years.

How much value do firms like PFM add? "Nobody tracks this," or compares muni investment yields, says Susan Woods, spokeswoman for state Auditor General Eugene DePasquale. New government accounting rules this year "will require standard disclosure for the first time."

Spagnola, who went to Catholic schools in Bethlehem, studied political science at Yale and worked for NBA star-turned-U.S. Sen. Bill Bradley (D., N.J.) before joining the NFL. Off-season, he interned at First Boston Securities. After a stint as a college football broadcaster at ABC - the toughest job he has worked, Spagnola says - he joined a young Prudential broker, Michael Cosack, to start a financial planning firm.

They were encouraged by two well-connected labor lawyers: Ken Jarin, now head of the government affairs practice at Ballard Spahr, and Gary M. Lightman, who represented state troopers.

"There are 3,000 public pension plans in Pennsylvania, one quarter of all the public pension plans in the U.S.," Spagnola said from his new office at the Center City high-rise BNY Mellon Center. "We saw this opportunity."

Each town had a pension committee to convince. Insurers in those days, before Fed interest rates fell, were competitors, promising plans fat returns. Spagnola and his partner "had to convince people to diversify."

It has not gotten easier, as pensions in older cities run deficits, and even firms that make money are not making pensions solvent, says former Phillie Larry Christenson, now a placement agent helping money managers get hired by pension plans. "They are the gatekeepers. We have a lot of respect for them," he said of Spagnola's firm, which merged into PFM in the late 1980s.

Wouldn't towns be better off just buying funds from Vanguard or another cheap provider? "Vanguard is our preferred choice of index fund managers" for stocks - U.S., and foreign - and real estate, Spagnola says.

"But we also think that equity returns are going to be flat, in the low single digits," and bonds worse. "How are pension systems going to reach their expectations of [earning over] 7 percent a year?" PFM isn't buying indexed bond funds: "We're 100 percent actively managed."

So fund managers feel forced "to take more risk and invest in asset classes that have a lot more volatility," he said. "With our style of management, you can see opportunities as they arise, through the selection of asset classes. We added a lot of value last year in small-cap international." PFM has lately gotten back into junk bonds.

Don't politicians expect advisors to give them money in exchange for getting hired? "We lost a lot of business because we didn't pay to play," Spagnola said.

City Council members often push the city pension system to invest in local firms. In the early 2000s, the city asked PFM to help find some. The city later told PFM to focus on female and minority managers. In 2012, then-chief investment officer Sumit Handa decided his staff could do a more efficient job.

Spagnola at the time said PFM had found good managers and its locally focused funds had beaten investment goals "11 out of 12 years," adding that "we were very, very disappointed. They were one of our oldest clients. But we also understand what they are trying to do. Whatever the city wants, we're a couple of blocks away."

The state police union and Gov. Wolf say there are too many municipal pension funds - hundreds just for police - and they should be combined, reducing fees.

It would help officers if they could more easily carry their pensions from town to town, Spagnola says. But PFM folks aren't fans of proposals to put the state's many municipal plans under state control.

JoeD@phillynews.com

(215)854-5194@PhillyJoeD

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