BWC to terminate investment with Fifth Third Bank Print E-mail
July 29, 2005

Underperformance, portfolio management changes cited by Ennis Knupp

(COLUMBUS) - The Bureau of Workers’ Compensation (BWC) announced today they are terminating their investment with Fifth Third Bank. BWC has asked that the remaining $50 million under management by Fifth Third in its large cap growth domestic equity fund be liquidated.

Ennis Knupp confirmed over the four-plus year period that Fifth Third managed assets for BWC in the large cap growth strategy, the investment declined approximately $9.7 million. Had the bureau invested in an index fund that tracks the S&P 500, which has been the manager’s benchmark, the value of its investment would have appreciated $4.6 million.

“Though Fifth Third is attempting to improve its performance, we cannot ignore the historical track record of underperformance over the past five years,” BWC interim Administrator/CEO Tina Kielmeyer said. “By terminating this investment, we are upholding our fiduciary responsibility to the injured workers and employers of Ohio who expect us to responsibly manage their monies.”

Additionally, fundamental changes in the portfolio management approach led Ennis Knupp recommending Fifth Third be terminated.

As of May 31, the market value of BWC’s investment was $49.2 million. Aggregate losses of approximately $10.8 million were realized and written off in prior fiscal years.

“It’s imperative to emphasize these losses have no impact on the value of the State Insurance Fund today,” Administrator/CEO Kielmeyer said.

A subsidiary of Fifth-Third was initially approved by the Workers' Compensation Oversight Commission in 1997 as a small-cap manager and managed $50 million. In January 2001, BWC reallocated those monies along with an additional $50 million from other equity investments were approved to provide initial funding to large cap growth fund. A third allocation of $10 million was made in February 2002, but BWC drew down Fifth Third’s account $50 million in May 2005 for operational cash requirements.

The bureau’s State Insurance Fund continues to be fully funded with an approximate value of $14.3 billion. It also possesses a surplus.

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Media contact: Jeremy Jackson, Ohio Bureau of Workers’ Compensation, at (614) 752-7558, or Emily Hicks, (614) 728-6197.