COLUMBIA, S.C. -- It's been almost three years since the South Carolina Retirement System gained voter approval to invest in equities, and the $16 billion fund finally may be ready to make the move.
Edwin Pearlstine recently was named chairman of the investment panel by Gov. David Beasley; and filling the vacancy left by Charles S. Way Jr., who was appointed state secretary of commerce at the end of 1998, may be the final bridge to cross on what has been a long journey.
The system will be investing 10% of the total fund in equities by the end of the summer, predicted Blaine Ewing, a member of the state's investment panel.
"It will be a fairly extensive process," he said -- especially since the panel has yet to decide on style allocations and the breakout between actively and passively managed portfolios. The in-house managed system currently is invested entirely in fixed income.
Mr. Pearlstine, owner of Charleston-based Pearlstine Distributors, was not available for comment.
The panel held its quarterly meeting at the end of April to start working on investment policy and investment guidelines. The Atlanta office of William M. Mercer Investment Consulting Inc. will assist in setting up an asset allocation and choosing investment managers, Mr. Ewing said.
The panel will report back to trustees of the pension fund on May 11.
The move to invest in equities began in November 1996, when voters approved a referendum to amend the state constitution and allow the retirement system to invest up to 40% of its assets in domestic stocks.
That vote was ratified by the state Legislature in May 1997, after ongoing disagreements about who should control the investments. Ultimately, lawmakers passed a bill in May 1998 to allow the system to invest up to 10% of the total pension assets over the next four years with the help of an outside investment panel.
Then-State Treasurer Richard Eckstrom won over lawmakers with statistics. He reported that the fund would have made $5 million per day between 1994 and 1997 if the system had been allowed to invest a full 40% of assets in the market. Even investing 10% of assets in that same time period would have yielded $1 million a day, according to Mr. Eckstrom.
An investment panel comprising five experts and chaired by Mr. Way -- who was then president of Charleston-based real estate firm The Beach Co. -- was set up in July 1998. The panel was charged with meeting quarterly to help expedite the equity investment process by deciding on investment policy and guidelines, as well as selecting investment managers. Mr. Way and the committee met and hired Mercer to help them at the end of 1998.
In November, Mr. Eckstrom lost his state treasurer re-election bid to Grady Patterson, who had held the seat for the 28 years preceding Mr. Eckstrom's four-year term.
Path to equity
Mr. Patterson, who is on the five-member state budget and control board, said that he plans to continue on the path to equity investing, but that what happens depends the state budget and control board's decision-making process.
"We're ready to go . . . Equities are on a long-term horizon; we have to look at it that way," he said, adding that it is impossible to judge how much the lost equity opportunities may have cost the fund.