SC Investment Oversight Panel Starts Work

October 13, 2005 ( - The state of South Carolina has set up a six-member independent panel to oversee the investment of $26 billion in state pension money.

A news report by the State (Columbia, South Carolina) said that the South Carolina Retirement Investment Commission grew out of an effort by state lawmakers to streamline the way the state invests its pension fund and, hopefully, earn a better return on those investments.

The commission is set to hire portfolio managers to invest part of the pension system’s assets as the panel members decide the fund’s overall investment strategy. A chief investment officer eventually will be hired to oversee day-to-day operations of the pension system, according  to the report (see  SC Pension Investment Board Created ).

Under the previous system, an investment panel handled stocks for the pension plan, and the State Treasurer’s Office was responsible for the bond portion of the portfolio (see  Inside Out ). All major decisions, including hiring fund managers, had to be approved by the Budget and Control Board, made up of elected state officials.

The big drawback, according to the newspaper, is that experts say requiring the investment commissioners to police themselves is fraught with legal and ethical pitfalls. “It’s the equivalent of the fox guarding the henhouse,” State Treasurer Grady Patterson, told the newspaper. Patterson, a commission member, argued unsuccessfully for more oversight of the panel when the Legislature was setting it up (see  SC Pension Reform Bills Differ Sharply ).

One of the trickiest issues could be adhering to ethics rules intended as a firewall between commissioners’ personal investments and pension assets promised to more than 90,000 state retirees and those yet to retire.

It’s up to the individual commissioners to make sure the guidelines are followed because no state agency has the authority to monitor for violations.

When setting up the new commission, lawmakers mandated that the appointees – who are unpaid except for Patterson, who gets a seat by virtue of his post as state treasurer – have an extensive investment background. The new commissioners must fill out statements of economic interest, which cover gifts they may get as officials and their business dealings with the state.

However, the form does not require commissioners to disclose their own personal investments or connections they might have with investment firms.