Showdown on SC Pension Fund Fees

Curtis-Loftis-Pic

By Paul Gable

SC Treasurer Curtis Loftis is holding up signing a $50 million investment check for the SC public pension fund until he receives confirmation in writing that the fees associated with the investment are the same as the SC Retirement System Investment Commission approved by recorded vote.

Loftis said, for years, commission attorneys have given verbal confirmation that the fees are the same as voted on. Reportedly, an email with this confirmation was sent to Loftis in this case.

However, the treasurer specifically requested a signed letter with that confirmation and, to date, he has been unable to get one. If the confirmation is accurate, why is it so difficult for Loftis to get written notice of that fact?

Loftis says the Investment Commission pays too much in fees in part because it votes on one fee structure but in the end, pays another. In one contract alone the contracted fee is approximately 25% higher, and that amounts to millions of dollars in overpaid fees.

“I will not allow the funds of South Carolina’s working people to be squandered,” Loftis said in a press release. “As the Commission’s lone elected official I have the duty to speak loudly and clearly on this issue. The Commission has accepted ‘business as usual’ but I will not. I will continue my efforts to bring transparency and accountability to the Investment Commission and I intend for the taxpayers and government employees to understand the risks of the system.”

South Carolina routinely finishes in the bottom 30% of its peer group for fund performance while paying in the top 5% in fees. In fiscal year 2012, the Commission paid $296 million in fees while earning only $125 million in return. This does not include the approximately $106 million in hidden “hedge fund of fund” fees for the same year.

“The Commission has failed to adequately provide documentation showing that the custody arrangements of our investments are safe,” Loftis said. “This is not Monopoly money, it is your money, and I will treat it like it is my own and I will not allow it to be sent off to investment managers without full assurance that safeguards are in place.”

Loftis is the only elected official on the investment commission, which operates without oversight while investing $26 billion in public funds for the state public employee pension plan. The commission’s website says the commission members are “financial experts.”

That may be the most troublesome fact. It was “financial experts” at Bear, Stearns; Goldman Sachs; Morgan Stanley; Citicorp; Merrill Lynch and AIG, among others, whose investment practices led to the mortgage bubble and resulting crash from which we are still recovering slowly.

For some reason, hearing “financial experts” at the SCRSIC want to keep details of their investments hidden from public view doesn’t fill me with a warm and fuzzy feeling.

 

 

Leave a Comment