Ohio Bureau of Workers' Compensation Fund, Columbus, should either put all its $14.5 billion in assets into index funds or terminate all of but its top-performing managers and put about 60% of assets into index funds, according to a report issued today by a management review team. The report from the three-person team appointed by Gov. Robert Taft also recommended that the fund move all of its internal trading functions to outside traders under competitive execution instructions and hire a custodian "to provide comprehensive, rather than partial, investment accounting."
According to the report, the underperformance of the fund's worst-performing managers has cost it $100 million per year over the past decade, and the fund pays about $36 million annually in fees to all of its 70 money managers. The study also estimates that three out of every four of the fund's managers underperform their benchmarks, net of fees.
In the past year, the fund has lost more $300 million on its investments, which included investments in rare coins and in hedge fund firm MDL Capital, which lost $215 million for the fund in 2004, its last year with the fund.
Calls to Lee Dasmel, the fund's acting CIO, were referred to Emily Hicks, a fund spokeswoman. Ms. Hicks would only say that the fund would support whatever decision is made by the state's Oversight Committee, which is appointed by the governor and would make any decisions about implementing any of the management review team's recommendations.