194
HOUSE OF REPRESENTATIVES             H.C.R. NO.            
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                     HOUSE CONCURRENT
                        RESOLUTION

REQUESTING A STUDY ON WHETHER INVESTMENT EXPENSES PAID BY THE
   EMPLOYEES' RETIREMENT SYSTEM ARE APPROPRIATE.



 1       WHEREAS, the Employees' Retirement System (ERS) was
 2   established in 1926 to provide retirement allowances and other
 3   benefits to state and county government employees; and
 4   
 5       WHEREAS, since its inception, the ERS has experienced rapid
 6   growth in membership, benefit payments, and assets; and
 7   
 8       WHEREAS, as of June 30, 1999, the market value of the net
 9   assets held in the broadly diversified ERS investment portfolio
10   was over $9.6 billion; and
11   
12       WHEREAS, according to the ERS's "Comprehensive Annual
13   Financial Report for the Fiscal Year Ended June 30, 1999" as of
14   March 31, 1999, thirty-five different companies were retained
15   by the ERS as investment managers for FY 1999; and
16   
17       WHEREAS, for fiscal year ending June 30, 1999, the ERS paid
18   out $54,702,525 in total investment expenses comprised of
19   investment fees and commissions of $26,006,325 and securities
20   expenses of $28,696,200; and
21   
22       WHEREAS, a comprehensive study is needed to review and
23   evaluate amounts paid out in investment expenses by the ERS;
24   now, therefore,
25   
26       BE IT RESOLVED by the House of Representatives of the
27   Twentieth Legislature of the State of Hawaii, Regular Session
28   of 2000, the Senate concurring, that the Auditor is requested
29   to conduct an audit of the investment expenses of the ERS; and
30   
31       BE IT FURTHER RESOLVED that the audit address the
32   following:
33   
34       (1)  Whether the ERS's investment expense is appropriate
35            for a fund of this size;

 
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 1       (2)  Whether the number of investment managers is
 2            appropriate to handle a fund of this size;
 3   
 4       (3)  How each investment manager was selected;
 5   
 6       (4)  How much each investment manager has been paid or is
 7            being paid to handle the investments and how it
 8            compares with what other systems pay their managers;
 9   
10       (5)  What the rate of return has been for each investment
11            manager's portfolio; and
12   
13       (6)  How the investment managers' fees are established and
14            how often the fees are renegotiated; 
15   
16   and
17   
18       BE IT FURTHER RESOLVED that the Auditor submit a report
19   with findings and recommendations to the Legislature no later
20   than twenty days before the convening of the Regular Session of
21   2001; and
22   
23       BE IT FURTHER RESOLVED that certified copies of this
24   Concurrent Resolution be transmitted to the Administrator of
25   the Employees' Retirement System and the Legislative Auditor.
26 
27 
28 
29                         OFFERED BY:  ____________________________