Good morning. My name is Robin Rayfield, and I am an STRS retiree and the Executive Director of ORTA.
Thank you for the opportunity to speak.
I am appreciative of the information provided with regards to the fees and expenses related to the alternative investment portfolio. The information provided points to a concern that I have.
Using the information provided earlier today, STRS paid external managers $709,000,000 to manage the illiquid portfolio which, according to information from the ORSC report provided a return of $200,000,000. Over $700,000,000 to earn a return of about $200,000,000 (less than 1%). Compare this to a low-cost passive investment in the S&P 500 of the same amount ($20 billion) that would have cost about $6 million and returned $5 billion. (25% on $20 billion). That’s a total loss of opportunity of $4.8 billion in lost investment returns and over $700 million in fees.
That lost opportunity is more money than all of the contributions by employers and individuals in that year! The external management fees alone are almost equal to the sustainable benefit program budget (SBP). The total budget for managing our portfolio is $880,000,000, which is more than the deminimus amount.
As you begin discussions on the investment asset allocations, please remember what I said a long time ago, everyone associated with STRS gets rich, the consultants, the management staff, Wall St., except the people that put the money in. We can either pay fees to our staff, consultants, and Wall St. or we can pay benefits to people that have earned them.
Robin Rayfield, Executive Director, ORTA December 12, 2024