The State Teachers Retirement System of Ohio (STRS) and the Ohio Police and Fire Pension Fund (OP&F)

The Ohio Retirement Study Council (ORSC) retained IFS in 2005 to conduct fiduciary performance audits of STRS and OP&F (collectively, the Systems), two of the five statewide public pension funds in the state of Ohio, with assets of nearly $60 billion as of June 30, 2005 and $13 billion as of December 31, 2005, respectively. STRS manages approximately 77% of its assets internally while OP&F uses virtually 100% external investment management. The ORSC's purpose is to advise and inform the state legislature regarding benefits, funding, investment and operations of the five statewide retirement systems in Ohio, including STRS and OP&F.

IFS' final reports were delivered to the ORSC and the Systems in December 2006. The reports contained eighteen task areas divided into two parts: (A) Investment Issues and (B) Management Issues. Within section (A) were 13 task areas: The Investment Policy Statement; Portfolio Risk; Investment Performance; Investment Structure and Costs; Use of External Consultants: Asset Allocation; Brokerage Practices; Due Diligence Procedures; Statutory Provisions and Administrative Rules; Conflicts of Interest; Custodian; Internal Controls and Risk Management; and Investment Accounting. Section (B) included five task areas: Board Governance, Policies and Oversight; Organizational Structure and Resources; Ability to Attract and Retain Employees; Monitoring of Investments and Reporting; and Reporting to the ORSC.

IFS conducted a custom peer group survey of comparable public pension funds for each System. While IFS found that the two Systems were generally in line with best practices, especially in terms of their investment programs, IFS did make a number of recommendations, some of which have already been implemented. Notable among IFS' recommendations for both STRS and OP&F are those concerning legal restrictions on the Systems' current opportunity to select and contract with custodian bank(s)outside of Ohio. IFS also evaluated the impact of the recently passed Senate Bill 133-dealing with other aspects of in-state investing-- and how the Systems were implementing its requirements.