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Already under fire for high pay despite big investment losses, the pension system for Ohio鈥檚 retired teachers lost between $27 million and $40 million when Silicon Valley Bank failed last weekend. That appears to be by far the biggest investment by a public pension system in the United States.

The losses follow a nearly $10 million loss last year when cryptocurrency platform FTX failed, according to the Ohio Retired Teachers Association, a group that represents pension system members.

The exact losses aren鈥檛 immediately known because Anthony Randazzo, executive director of pension watchdog said they were $39.3 million in a tweet. But pension system spokesman Dan Minnich said in an email, 鈥淎s of last Wednesday, STRS Ohio held shares of Silicon Valley Bank (SVB) worth $27.2 million.鈥�

That was the stock value just before the collapse 鈥� and presumably much less than when the system purchased 171,000 shares in the bank. As of the close of business Wednesday, Minnich hadn鈥檛 answered what the system鈥檚 total losses were on its SVB investment.

Also losing money was the Ohio School Employees Retirement System, which had $7 million invested with the bank, according to Randazzo.

In response to the State Teachers Retirement System losses, the Retired Teachers Association continued its criticism of the management of the $90 billion pension system.

鈥淪TRS has lost nearly $40 million of teachers鈥� hard-earned dollars after Silicon Valley Bank imploded overnight,鈥� Executive Director Robin Rayfield said in a statement.

He added, 鈥淣ot only is STRS gambling away our hard-earned dollars through active investment management, but they鈥檝e proven to be horrible gamblers. STRS also lost nearly $10 million when its investment in bankrupt cryptocurrency platform FTX cratered after its collapse in December 2022.鈥�

In the case of Silicon Valley Bank, STRS investors had reason to suspect there was elevated risk.

CEO Greg Becker to exempt banks of Silicon Valley鈥檚 size from rules under the Dodd-Frank law intended to ensure that banks wouldn鈥檛 suddenly fail and create a panic. into law in 2018.

Silicon Valley Bank, or SVB, appears to have taken on much more risk as a consequence. While it had $45 billion in assets in 2016, that amount swelled to $200 billion by 2021, the New York Times reported Tuesday on its podcast, .

In what鈥檚 now regarded as poor risk management, SVB invested heavily in long-term bonds 鈥� essentially . But factors such as the pandemic and the Russian invasion of Ukraine helped goose inflation and by last Wednesday SVB was so desperate that it suddenly sold off $21 billion in long-term bonds. That spooked depositors, who started lining up to pull their money out.

The regulations that Becker fought to get out of would have required 鈥渟tress tests鈥� that might of warned of the coming storm and a 鈥渓iving will鈥� that would have planned to unwind the bank in an orderly fashion if the results of those tests turned bad.

Becker and other SVB executives are under fire for over the past two years in the midst of the greater risk-taking. And, while he claimed a failure of banks his size wouldn鈥檛 cause a panic, federal authorities official declared there was a risk of a panic and announced they would .

Despite the measure, global markets were still jittery in the wake of the collapses of SVB and Signature Bank, in which STRS said it was not invested. The New York Times reported that stocks were down around the world and like SVB for which Trump relaxed regulations.

If the figures posted by Radazzo, the pension watchdog, are correct, STRS鈥檚 was by far the biggest loss of any public pension system 鈥� almost 32% greater than the next highest, the California Public Employees Retirement Fund.

The most recent investment losses come to a retirement system that鈥檚 been under fire for lavish pay for what many retirees believe is sub-par performance.

At least 200 of the retirement system鈥檚 500 employees make more than $100,000 a year. And, with bonuses, in the 2021-2022 fiscal year 33 of the system鈥檚 employees made more than $300,000. Nine made more than $500,000.

Those employees have invested heavily in high-fee, 鈥渁lternative鈥� investments that have underperformed the system鈥檚 traditional investments. Over the past decade, traditional investments provided a 14.8% return, while the system鈥檚 alternative investments have provided 11.84% once fees are subtracted, an STRS spokesman said last year.

Meanwhile, retirees last year got just a 3% cost-of-living increase 鈥� their first since 2017. An STRS spokesman has explained that the freeze was due to new rules set down by the legislature in 2012.

Retirees also were infuriated with the way the STRS board handled staff bonuses last year. In August, it awarded $10 million in bonuses even though it estimated that it would lose $3 billion in an environment that was brutal for investors.

Two months later, the actual numbers for alternative investments came in and losses were 77% higher than original estimates 鈥� .

Questions about the management of the pension fund have grown loud enough that last month, . Instead, it deadlocked 5-5.

News of the latest losses has intensified criticism of Neville鈥檚 management.

鈥淪TRS fund mismanagement has resulted in years of no cost-of-living increases for Ohio retired teachers and current teachers are being forced to pay more and work longer for less benefits,鈥� the Ohio Retired Teachers Association said in its statement. 鈥淩etired teachers were furious after STRS staff were awarded a record-breaking $10 million in performance bonuses last year despite losing $5.3 billion.鈥�

For its part, STRS praised federal regulators for taking steps to protect depositors 鈥� even though those steps don鈥檛 affect the system鈥檚 investment losses.

鈥淭he collective actions taken by the Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation to insure and backstop deposits have helped to mitigate the situation facing the banking industry,鈥� Minnich said. 鈥淪TRS Ohio continues to monitor and assess the impact of these developments.鈥�

is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Ohio Capital Journal maintains editorial independence. Contact Editor David DeWitt for questions: info@ohiocapitaljournal.com. Follow Ohio Capital Journal on and .

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