S.C. Pension Criticized Over Fees

Aug 6 2013 | 9:46am ET

South Carolina's main public pension fund is the latest to come under fire for the fees it pays to hedge funds.

The Maryland Tax Study Foundation and Maryland Public Policy Institute have found that the $27 billion South Carolina Retirement System paid 1.305% of its assets in fees, only slightly more than its five-year rate of return and more than three times the mean fee ratio for all state pension plans.

"I suspect some states may hide fees," study co-author Jeff Hooke told GreenvilleOnline.com. But South Carolina "is so far ahead of the pack, it's hard to believe that everybody has padded their fees except for South Carolina."

The pension defended itself against the allegations.

"SCRSIC actually is at the forefront of reporting and disclosure, and we reject the attempt to slander us by making false comparisons (themselves within a flawed study) with other states that, as the documentation shows, report very little by comparison," Hershel Harper, the pension's chief investment officer, said.

The higher fees are necessary to allow the pension to invest in hedge funds, something it has only been allowed to do for six years and something which reduces its vulnerability in times of market volatility, it said.

"We believe that the best opportunities to achieve higher returns without taking on higher risk will be through both continued investment in private markets and real estate as well as maintaining a diversely-allocated portfolio, thereby avoiding risk concentration," Harper and pension Chairman Reynolds Williams said in SCRSIC's most recent annual report.

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