Alabama Inc.

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Bronner, who insists he avoids conflicts of interest by not owning personal stock in any company, counters that the RSA--US Airways arrangement is hardly a conflict but rather a healthy symbiosis. "We at [RSA] are not some hedge fund out to make a short-term buck," he says. "We're into a long-term commitment that protects the investments we already had in this airline." And it's hard to find critics of Bronner in Alabama, which has embraced the Minnesota Yankee as one of its own. He arrived in 1969, earned a law degree and the finance Ph.D. at the University of Alabama at Tuscaloosa, and was appointed to head RSA in 1973 by Governor George Wallace. At that time, the pension fund's asset-to-liability ratio was a perilous 25%; today the system is almost fully funded at 96%. "His investments have been innovative and effective," says Warner Floyd, head of the Alabama Retired State Employees Association, "and they've had the added value of changing the state's skyline." Floyd argues that the 21 championship golf courses and resorts built by RSA since 1993 for $173 million (with three more set to open early next year) have helped boost Alabama's tourism revenue from $1.6 billion a decade ago to $6.5 billion today, and that billions more in RSA investments and loans have helped attract new industry to the state, including loan recipient DaimlerChrysler, which built a 1,900-employee Mercedes-Benz plant in Tuscaloosa in 1997.

"In Alabama you can still be a cowboy," Bronner observes. "If you're dumb enough to try something new down here, they'll say, 'Go ahead.'" Because the state is always a public pension fund's major contributor, he says, "if you don't help make the state economy strong, you're hurting yourself as a fund manager." Bronner has steered about 45% of RSA's assets into the public-equities market, compared with 56% for the average pension fund. The rest of RSA's capital has flowed into fixed-income and direct investments, such as $68 million worth of upscale retirement-home construction, six neoclassical office towers in downtown Montgomery and a mini media empire: Community Newspapers, a chain of more than 250 small-town papers around the U.S., and Raycom Media, 36 TV stations that reach 10% of U.S. households.

Bronner's in-state investments may serve the state's economic development, but they "risk violating a core principle of his job--diversification," says Randall Eberts, executive director of the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich. "His projects are impressive, but they risk reducing the rate of returns he could be achieving." For the past decade, RSA's flagship $14 billion teachers' fund gained a respectable (if middling) 7.2% a year on average, compared with a median of 7.9% for public pension plans as tracked by the investment consulting firm Callan Associates. The teachers' fund outperformed its peers in the past three years and five years, and overall, RSA's 19-fund portfolio has been less volatile than most pension portfolios. While Bronner didn't earn the overall market's lavish returns during the 1990s tech boom, he hasn't lost as much since then either. Alabamians--especially those who remember RSA's volatile, pre-Bronner returns--seem to value such middle-of-the-road dependability even if the means to achieving it are unorthodox.