SC pension system defends fees it pays

jself@thestate.comDecember 11, 2013 

— Comparing management fees paid by South Carolina’s $27 billion retirement fund to those paid by other states is not fair because South Carolina reports its fees more thoroughly than other states, a manager and consultant told legislators Wednesday.

A special state Senate panel, investigating the state Retirement System Investment Commission, heard testimony Wednesday about why the pension system paid $420 million in fees last year to outside managers to invest retirement money for public workers.

The question of whether South Carolina pays too much is just one that the four-member, bipartisan panel hopes to answer as it tries to address state Treasurer Curtis Loftis’ criticisms that the Investment Commission is corrupt and wastes money.

State Sen. Joel Lourie, D-Richland, co-chairman of the Senate panel, said he hopes the panel’s findings can clear the air, referring to the bitter rift between Loftis and other Investment Commission members.

Loftis has urged lawmakers to find out why the state paid $420 million in management fees in the fiscal year that ended June 30, up from $1 million in 1998. Despite those high fees, the pension fund continues to perform below the national average for investment returns, Loftis says.

The $420 million amounted to 1.57 percent of the total retirement fund -- the highest any state paid in fees as a percentage of its pension fund, Loftis has said.

But comparing South Carolina to other states is unfair, said Herschel Harper, the Investment Commission’s chief investment officer, and Suzanne Bernard, a partner with Hewitt EnnisKnupp, a private investment consulting firm hired by the commission.

South Carolina’s figure is high because the state reports more expenses as fees than regulators require, setting it apart from other states, Bernard said. She said South Carolina’s fee reporting is “much more comprehensive than anything that I’ve ever seen.”

Lourie asked Harper and Bernard to find out how South Carolina’s fees compare to other states and why the fees are so high. “You have to help us understand why our $420 million is an acceptable number.”

Alex Stroman, Loftis’ spokesman, said what is missing from Bernard and Harper’s explanation is data from other states to back it up.

South Carolina’s fees have been climbing steadily for several years, he said. “At the end of the day, we know what we pay.”

Reach Self at (803) 771-8658.

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