State pension plan paying higher investment fees than previously reported

The Kentucky Retirement System (KRS) is paying big investment fees to money management firms to the tune of 75 percent higher than what the system has previously reported, according to the Kentucky Center for Investigative Reporting.

The Kentucky Center for Investigative Reporting article shows that the system has put billions of dollars into investments cloaked in secrecy and out of public view.

In fiscal year 2015, KRS estimates spending $108.3 million in investment expenses—now including the previously undisclosed fees paid to private equity firms—after showing $62.4 million in investment costs in 2014.

From the Kentucky Center for Investigative Reporting article:

Transparency is not a hallmark of the hedge funds and private equity firms with whom KRS is doing business. They require KRS to cloak the specific investments in their portfolios. KRS complies.

Kentucky laws enacted in 1992 and 2008 exempt the investments from the state Open Records Act. It allows KRS to accept the firms’ claims that transparency would make the makeup of their funds easy prey for copycats. Since everything is under wraps, the public can’t know if the recipes are worth copying.

The Kentucky Center for Investigative Reporting learned that first-hand. Under the state’s open records law, we obtained the latest Daniel Boone, Henry Clay and Newport Colonels annual reports — for 2012 — from KRS and turned to the pages containing specific investments. The lists were whited out.KRS refused to supply the names of holdings.

“We view that as essentially forcing the equivalent of Coca-Cola to release their secret formula in exchange for allowing us to invest in Coke,” said KRS Interim Chief Investment Officer David Peden.

Read the full article here.

Categories: Pensions

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