Dean Dennis to STRS Board, 5/19/22: Like the majority of members who voted, I have lost confidence in management

Dean Dennis' comments to STRS Board

May 19, 2022 

I am Dean Dennis, retiree from the Cincinnati Public Schools, member of OFT Local 1520-R, Moderator for STRS Members Only Forum, ORTA Southwest Liaison, and Ohio STRS Watchdogs Administrator.

For 8 months, I've requested the breakdown of STRS total investment costs which STRS represents as being around 12 basis points. Investment costs this low, from an active management structure like STRS, defies everything I have ever read. Fifty to sixty basis points would be more in line. So, it was interesting to watch this month's Ohio Retirement Study Council as our Chief Financial Officer reported to the ORSC Chair that our annual investment costs were 32 basis points. What's going on, different investment costs depending on the audience? 

What was the motivation of the presentation from our Executive Director at the start of last month's meeting? Was it to convince Trustees active management of investments is better than investing in indexes?  

To review, if we completely invested all our monies in the S&P 500 (FVINX) from June 30, 1999, at the top of the dot-com bubble, to June 30, 2021, then STRS investments would have earned several 10's of billions less, than how STRS actually did invest our monies.  A  comparison that would have been interesting is how STRS' actual invested proportion of their portfolio designated to US equities, fared against the S&P 500 index during this time period. 

But, let's go back to the exercise that was presented and see how STRS actually invested their monies and compare it against the S&P 500 index from FY 1989 - FY 2021, a much longer time, but one that has the same recent ending point. We find the S&P 500 would have returned 11.16% compared to the 8.33% that STRS actually earned. So, it does appear that long term investing in indexes instead of trying to beat the market pays off.  

I want to thank Dr. Fichtenbaum, whose analysis of STRS performance against the S&P 500 (FVINX) is posted on the Watchdogs Website for review. Our Board should request a presentation from him. One only has to do a little research to grasp that investing in indexes outperforms investment experts approximately 85% of the time over a 10 year period, and approximately 95% of the time over a 15-year period of time. Research shows investing in indexes also saves in fees, and is less risky and more transparent.

Lastly, I view this election as not rejecting those who didn't get the most votes, but as a referendum for changing how management does business. Members don't care about the awards STRS racks up. STRS awards are meaningless to retirees who need a COLA and active teachers who want a realistic retirement formula. 

Like the majority of members who voted, I have lost confidence in management.