What STRS Tells Members

Ohio State Teachers Retirement System (STRS) regularly states that its investment program is audited for compliance with the CFA Institute’s Global Investment Performance Standards (GIPS®). In fact, STRS highlights the “ACA Performance Services Letters” as if they are an independent certification that the entire portfolio — including private equity — meets these rigorous standards.

The Problem: GIPS Does Not Cover Everything

• Traditional assets like public equities and bonds can be benchmarked and reported under GIPS, which require daily pricing, market valuation, and time-weighted returns.
• Private equity and other alternatives are fundamentally different:
  • Returns are often based on manager self-valuations, not market pricing.
  • Cash flows are irregular and subject to GP discretion.
  • Leverage, subscription lines of credit, and co-investments distort reported returns.
• GIPS itself has special guidance for alternative assets, but these provisions cannot cure the fact that STRS only gets opaque, manager-provided marks, not independent valuations.

Why the ACA Letters Mislead

• The ACA Performance Services assurance letters STRS shows to members don’t certify the quality of the numbers — they only certify that certain composites were presented “in accordance” with GIPS procedures.
• This is an attestation engagement, not a financial audit. It does not:
  • Verify the accuracy of private equity valuations;
  • Guarantee that fees and expenses are correctly applied;
  • Confirm that all assets are included.
• Importantly, ACA letters are limited-scope. They may only cover selected composites or asset classes — not the entire STRS portfolio.

Why This Matters for Fiduciary Duty

• Teachers are being told that STRS’s entire investment program is GIPS-compliant, when in reality the most opaque, highest-fee asset class — private equity — falls outside the effective scope.
• The assurance letters create a false sense of security, leading members to believe that their money is being measured with the same transparency as public mutual funds.
• Fiduciaries who repeat these claims risk breaching their duty of loyalty and prudence by substituting “compliance marketing” for real transparency.

Bottom Line

STRS’s claim of “full GIPS compliance” is misleading at best, deceptive at worst.

• Yes, portions of the portfolio may follow GIPS procedures.
• But the private equity portfolio — where billions are at stake and transparency is weakest — is not independently validated under GIPS.
• Until STRS subjects its private equity program to true independent valuation and public disclosure of contracts, no compliance letter can change the fact that teachers are being misled about their returns.

Possible CFA Ethics Violations by STRS Ohio Charterholders

According to LinkedIN there are at least 10 CFA charterholders working at STRS Ohio.  CFA Charterholders sign an annual statement affirming they will comply with the CFA Institute Code of Ethics and Standards of Professional Conduct. At a minimum, three key principles apply here:

• Standard I(C): Misrepresentation — Members must not make or allow false or misleading claims.
• Standard I(D): Misconduct — Members must not engage in conduct that compromises professional reputation or integrity.
• Standard V(A): Diligence and Reasonable Basis — Members must exercise diligence, independence, and thoroughness in making recommendations and ensuring performance reporting is accurate.
• Standard VII(A): Conduct as Members and Candidates — Members must not engage in conduct that compromises the integrity of CFA Institute or the CFA designation.

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1. Misleading GIPS Compliance Claims

• Issue: STRS claims full GIPS compliance, and public-facing ACA “assurance” letters are used to reinforce this. In reality, compliance does not extend to private equity — the largest and most opaque asset class.
• Possible Violation:
  • Standard I(C): Misrepresentation — By signing off on these claims (or staying silent while they’re used in STRS materials), CFA charterholders could be complicit in misrepresenting performance standards to members.
  • Standard V(A): Diligence and Reasonable Basis — If CFAs knew or should have known private equity returns were not validated under GIPS, endorsing compliance is not diligent or reasonable.

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2. The Anonymous Letter → QED Case Against Trustees

• Issue: Attorney General Yost’s case against reform trustees Steen and Fichtenbaum was built on an anonymous staff letter, very likely authored or supported by STRS investment staff (including CFA charterholders).
• Possible Violation:
  • Standard I(D): Misconduct — Participating in or enabling an anonymous smear campaign violates the professional duty of honesty and integrity.
  • Standard IV(A): Loyalty — A CFA charterholder’s duty is to their client — in this case, Ohio teachers — not to protecting STRS management from scrutiny.
  • Standard VII(A): Conduct as Members — Hiding behind anonymous letters to trigger “lawfare” undermines the integrity of the CFA designation.

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3. Endorsing ACA as “Governance Consultant”

• Issue: Instead of hiring an independent governance consultant, STRS hired ACA, a firm with a track record of legitimizing excessive pay (see CalPERS case via Naked Capitalism). ACA also backs STRS’s questionable GIPS claims.
• Possible Violation:
  • Standard VI(A): Disclosure of Conflicts — CFA charterholders involved in recommending ACA had a duty to disclose potential conflicts — namely, ACA’s incentive to validate STRS’s compensation structure.
  • Standard I(C): Misrepresentation — By presenting ACA as “independent,” when ACA’s business model favors staff, charterholders may have misled the board and members.
  • Standard III(A): Loyalty, Prudence, and Care — Endorsing conflicted advisors who rationalize excessive fees and bonuses undermines fiduciary duty to beneficiaries.

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Broader Concern: Culture of Silence vs. “Name and Shame”

The CFA Code emphasizes integrity of markets and protecting clients first. Charterholders are expected to “name and shame” — meaning they should call out unethical practices even when doing so is uncomfortable.

At STRS, instead of whistleblowing, CFA charterholders:

• Accepted inflated bonuses linked to opaque valuations,
• Backed staff-driven narratives over independent governance, and
• Stayed silent while trustees were attacked with the QED distraction.

That silence itself could be construed as a violation of Standard I(D) Misconduct and Standard VII(A) Conduct as Members.

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Conclusion

There is a colorable case that multiple CFA Standards may have been violated by STRS charterholders:

1. Misrepresentation (I(C)) — GIPS compliance claims that omit private equity.
2. Misconduct (I(D)) — Anonymous letters weaponized against trustees.
3. Conflicts of Interest (VI(A)) — Supporting ACA despite conflicts.
4. Loyalty, Prudence, and Care (III(A)) — Failing to protect teachers from excessive fees and secrecy.

At minimum, these raise grounds for referral to the CFA Institute’s Professional Conduct Program.