This needs to become a top priority!
Dean Dennis addressed the STRS Ohio Retirement Board during the meeting on August 17, 2023.
What are risky investments? Perhaps investments with hidden fees and non-disclosure-agreements that not even our Board members are allowed to see. Such as the Private Equity investments found in our Alternative Investments portfolio.
These risky investments were addressed in the 12/29/2022 State Auditors Report. Concerns were raised regarding fee disclosure. Page 24 of the report reads, "Given the longstanding issues about PE fee completeness, the Ohio legislature should consider legislation restricting the kinds of PE funds the state pension funds can invest in, such as requiring state pension funds to obtain certain fee disclosures that can be made public as a precondition to using an external asset management firm."
Since 2010, our Alternative Investment portfolio has tripled from 7% of our portfolio to 21%. It's problematic because we can't audit the fair value of this portfolio which accounts for approximately $19 billion dollars. Instead, we rely upon 130 General Partners to tell us the fair value of 130 investments. If you read an STRS Comprehensive Annual Financial Report, you might come across this disclosure, "Due to the nature of Alternative Investments, substantially all investments in this asset class are valued using market-based inputs that are comparable, but subjective in nature due to the lack of widely observable inputs." Again, these investments are, "subjective in nature due to the lack of widely observable inputs."
More questions about PE investments. In 2020, members raised $75,000 to conduct a Forensic Audit. The audit never was completed due to requested paperwork over transparency being withheld by STRS management. Benchmark Financial Services and STRS are now in a court battle over these transparency issues. Why are some Board members supporting legal efforts which hide fees and NDA's in our investments and obscure the fair value of these investments?
There's a Code in Ohio. It's Section 3307.15 of the ORC. It is titled Investment and fiduciary duties of board. Section (e) of the code states, "Any statement of financial position distributed by the board shall include the fair value, as the statement date, of all investments held by the board under this section."
In conclusion, Members of the Board, in my opinion, when you are unable to audit 21% of the investments in our portfolio, they become illegal investments. I believe holding them in our portfolio is actionable. An independent legal opinion needs to be sought as to if public monies can be used in investments which cannot be independently audited, have hidden fees and NDA's. This needs to become a top priority. Thank you.
Dean Dennis is a retired teacher from the Cincinnati Public Schools, President of the Ohio Retirement for Teachers Association (ORTA), Founder of STRS Ohio Watchdogs, member of the Ohio STRS Member Only Forum (MOF), Hamilton County Retirees Chapter, and the Cincinnatti Federation of Teachers Retiree Chapter.
Those of you who followed us on our old website know that there was a lot of information there. We are in the process of moving older posts, that we want to preserve and share with new Watchdogs, from our old website to our new website. This is one of those posts.