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Published: Friday, 6/18/2010

Ohio pension funds split on BP

BY JIM PROVANCE
BLADE COLUMBUS BUREAU CHIEF

COLUMBUS - While those overseeing pension funds in the United States and globally have nervously watched their investments in BP leak red ink with every gallon of crude spilling into the Gulf of Mexico, one Ohio pension fund has been buying.

The School Employees Retirement System, one of five state public-employee pension funds, has apparently seen the recent drop in BP stock value as a chance to pick up a bargain. As of April 15, the fund held no BP stock. As of Tuesday, it held $12.3 million worth, a demonstration of faith in the long-term future of the energy giant.

"All of our managers are external," said fund spokesman Tim Barbour. "They have full discretion to purchase when they see fit. They don't need to check with us before they buy."

He noted that the fund's exposure to BP represents just 0.13 percent of its holdings.

While SERS has been buying, the State Teachers Retirement System has been selling. It has sold nearly 3 million of the 13.9 million shares it held in BP stock as of April 1, when the total value of the investment was $134 million. The value of the 10.9 million remaining shares is now about $55 million.

"This lower value reflects both less shares and the almost 50 percent drop in share price during this period," said system spokesman Laura Ecklar. "Throughout this time period, the market value of our BP stock holdings represents less than one-half percent of the market value of our international stock holdings."

The value of STRS international portfolio is between $13 billion and $14 billion.

Ty J. Young, president and CEO of the Atlanta-based "safe money" investment firm of Ty J. Young, Inc., said he would not advise his clients to invest in BP right now what they can't afford to lose.

"Catching stock on its way down to make money is like trying to catch a falling knife," he said. "Sometimes you make money, but most of the time you get hurt."

BP stock is widely held among pension funds in the United States. Although it experienced a rally in the immediate wake of BP's decision to divert future shareholder dividends to help establish a $20 billion compensation fund, the value of the oil giant's stock has dropped dramatically since the fatal explosion on the Deepwater Horizon deep-sea oil rig on April 20.

The value had dropped so rapidly since April that new British Prime Minister David Cameron found it necessary to scold President Obama for his public berating of BP, formerly British Petroleum, because of the adverse impact on pension funds in the United Kingdom.

The Ohio Police & Fire Pension Fund has seen the value of its 2.5 million BP shares plummet.

"Our BP stock is managed by a couple of different managers, who have specific guidelines built in, triggers as to when to sell and when to buy," said fund spokesman David Graham. "That's been a successful operation for us." The fund also holds a BP note expected to be worth $550,000 when it matures in late 2013. It's valued at $498,000.

The largest of Ohio's public pension funds, the Public Employees Retirement System, did not return repeated calls yesterday for information on its BP holdings.

Dan Weiss, executive director of the Ohio Highway Patrol Retirement System, said the smallest of Ohio's pension funds has little direct BP exposure.

"We have no direct holdings in BP and have not since the end of 2009," he said. "We do have some exposure in the index that is fairly incidental."

Mr. Young's opinion of BP as an investment deteriorated with the announcement that it had agreed to create the compensation fund.

"They eliminated dividends [Wednesday]," he said. "They're selling off assets. That takes money out of the hands of BP. They can't run their business the same way. This cuts into profits and hurts stock prices. It hurts their ability to do the right thing in the Gulf."

Contact Jim Provance at:

jprovance@theblade.com,

or 614-221-0496.



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