By Paul Gable
It became more obvious Monday why the S.C. Retirement System Investment Commission wants to silence S.C. Treasurer Curtis Loftis.
Just a few days after his fellow commissioners voted to censure him, Loftis issued a press release in which he detailed an additional approximately $114 million in unreported fees on the commission’s annual report and financial statements.
The unreported fees are associated with the approximately $3.3 billion “Fund of Hedge Funds” listed in the report, according to a March 4, 2013 letter Loftis sent to Suzanne M. Bernard, a principal in Hewitt EnnisKnupp, Inc., a consulting firm for institutional investors.
“Everyone agrees that state law directs that ALL fees should be included in our annual reporting,” said the Loftis letter. “At present, we report only the “top layer” of fees, but we do not report the “bottom layer” of fees charged by the underlying fund managers.”
Loftis estimated the bottom layer of fees at $106,826,917 for 2012 plus an additional $8 million of unreported incurred fees. Not reporting these fees “understates our fees, which would seem to distort the results of a fee study. I suggest that Hewitt find a way to include these fees in their next analysis.”
Loftis noted that the pension fund reported $296 million in fees while reporting only $125 million in profit for FY 2012. The additional unreported fees make that spread only worse.
“Fully complying with state law to present all known fees such as the approximately $106 million in previously undisclosed fees will encourage other states to follow our lead,” Loftis said. “These fees are a hidden drag on public pension plans in South Carolina and around the country. Transparency is the only way to ensure that the money contributed by taxpayers and public service employees is effectively managed.”
Since assuming office in 2011, Loftis has been a critic of the underperformance, excessively high fees and low rate of return, of South Carolina’s pension fund when measured against other state pension funds around the country.
Loftis believes in making these results public so that the public and General Assembly understand the true performance of this important future liability of state government.
Loftis was “censured” by the politically appointed commissioners of the SCRSIC last week as an “attack on a method of communication.”
In other words, Loftis was “censured” for making public the poor performance of the pension fund. The political appointees would seem to prefer that performance remain secret from the taxpayers of the state.
Loftis letter: http://www.treasurer.sc.gov/Documents/20130304HewitFeeLtr.pdf
Press release: http://www.treasurer.sc.gov/Documents/HEKletterrelease3-4-13.pdf