While both House Bill 227 – passed by an 80 to 13 vote – and Senate Bill 133 – passed by a 27 to 6 vote – do share similarities, such as removing the state’s attorney general from the pension boards so that officeholder is free to investigate wrongdoing in the systems (See Bill Places Ohio AG in Pension Investigator Role), it is a radical departure in investment philosophy embodied in the two bills that will keep lawmakers at odds with each other.
Specifically, the House version of the bill attempts to place mandates on how the $100 billion in state pension funds assets are to be invested. Those requirements include:
- 50% of the money invested externally must be placed with a firm that has its headquarters in Ohio or has at least three offices employing 15 or more people in the state;
- 70% of stock or bond trades would need to be made with firms that are either based in Ohio or have officers in the state;
- another 10% above the above designations must be placed with minority firms that also meet the foregoing Ohio-centric criteria.
This in turn has policymakers on both sides scrambling for position. Investment managers argue such a move places many on them on the outside looking in, thus causing the pension funds to look elsewhere for investment management with sub-par returns (See Ohio Pension Funds Face “Home Grown” Investment Restrictions ). Joining Wall Street in the dissent has been both the Council of Institutional Investors and the National Association of State Retirement Administrators (NASRA).
On the other side of the equation is the Ohio Bankers League. League President Mike Van Buskirk says Ohio firms would have no problem handling a much larger share of trades and investments HB 227 would heap on them, while executing the services at a competitive cost.
As yet straddling the fence is Ohio Governor Bob Taft, who has announced his support for the governance and ethics provisions of both bills, but said he’s undecided on the “buy Ohio” part of the House bill, spokesman Orest Holubec told the Columbus Dispatch.
« SEC Examining Wilshire Mutual Fund Trades