Ohio investment funds take hit

From John Curry, October 9, 2008
Subject: Put a positive spin on this one, Laura!

"Payouts to those receiving pensions from the funds will not be affected, representatives of the funds said."

Let's see if they hold up this promise considering what we've already suffered with our skyrocketing insurance premiums! John

Ohio investment funds take hit
Ohio.com
By JULIE CARR SMYTH
AP Statehouse Correspondent
Published on Thursday Oct 9, 2008

Ohio's much-maligned insurance fund for injured workers has withstood Wall Street's downturn better than most of the state's large public funds, declining 1 percentage point in the same period the state's public pension funds lost billions.

The five pension funds, which hold a combined $170 billion, are designed to handle the market's plunge, their directors say. So is the state treasury, said Ohio Treasurer Richard Cordray. It held more in June than in January.

The performance of the Ohio Bureau of Workers' Compensation's investment fund is notable, however, because of its place at the center of a scandal that broke out in 2005.

Between January and June, the bureau's investment fund fell from $16.2 billion to $15.9 billion, a loss of $220 million, or 1 percent. The value of state pension funds for firefighters, police, teachers, troopers and other public employees fell an average of 8 percent during the same period.

By the end of September, the injured worker fund was down 4 percent for the year. The pension funds for which figures were available at that point had fallen an average of 11 percent.

The state's CollegeAdvantage fund, which holds college tuition investments, is down 7 percent for the year. The fund that pays unemployment benefits to Ohio workers has plunged 24 percent since the start of the year, with a rescue plan in the works to appear on the ballot next month.

Amid it all, the scandal-plagued Workers' Compensation fund is the state's bright light.

Its current ultra-safe investment policy, implemented in the wake of the scandal, is the explanation, said spokeswoman Maria Smith.

The scandal began with revelations in 2005 that prolific Republican fundraiser Tom Noe had been given access to $50 million in bureau funds to invest in rare coins since 1998. As the probe unfolded, it turned out the bureau was also the sole investor in a risky hedge fund set up by MDL Capital Management, which lost $216 million in the venture.

Noe was convicted of theft of funds, and MDL chief executive Mark Lay was convicted of repeatedly misleading the bureau about the risk it was taking in the hedge fund. Both were sent to prison.

Heads rolled, the bureau was restructured, and new investment restrictions were put in place. Legislators banned the bureau from investing in nine high-risk investments: coins, artwork, stamps, antiques and certain unregulated investments.

Gov. Ted Strickland, a Democrat who campaigned against the Republican corruption that led to the scandal, also appointed a new, independent board of directors made up of outsiders who continued to fine-tune the investment policy to make it even safer.

Managers of Ohio's five big pension funds _ Public Employees Retirement System, State Teachers Retirement System, Ohio Police & Fire Retirement Fund, Highway Patrol Retirement System and State Employees Retirement System _ said they are obviously not happy with their losses amid Wall Street's troubles. The biggest is Police & Fire's 14 percent for the year.

"They're long-term investors, so they have provided for these market fluctuations," said Aristotle Hutras, director of the Ohio Retirement Study Council, a legislative panel that monitors state pension funds. "They're no different than anybody else. Warren Buffett's lost money, they've lost money. But it's interim; they'll be back. Right now, there's no place to hide."

Most of the funds aim for 8 percent growth each year, and when they exceed that, they can carry that money over to cover such losses. Payouts to those receiving pensions from the funds will not be affected, representatives of the funds said.