COLUMBIA - The agency investing South Carolina's pension portfolio doesn't overpay in investment fees but rather reports those fees more thoroughly than any other public pension fund in the nation, according to an external audit released Tuesday.

The review by Michigan-based Funston Advisory Services is the latest to find no evidence of criminal or ethical wrongdoing at the Retirement System Investment Commission despite years of accusations by Treasurer Curtis Loftis. Funston's nearly-300-page report says the dysfunctional relationship between the commission and Loftis, a member of the agency's board, is one of the most significant risks to the $27 billion portfolio that benefits more than 550,000 public workers, retirees and their beneficiaries.

"These attacks must stop if there is to be any hope of progress and restoration of trust," the report reads.

Loftis, the board's only publicly elected member, has long argued the investment agency pays too much in fees while underperforming. The commission has responded it reports fees others don't. Lawmakers have been awaiting Funston's report to address that dispute. Earlier this month, a Senate panel concluded Loftis' allegations of criminality were unfounded, following similar conclusions by the state inspector general, attorney general's office and state Ethics Commission.

"We are very gratified that Funston is the fourth independent body of review that has found absolutely no wrongdoing," said the commission's chief operating officer, former Sen. Greg Ryberg.

According to Funston, the commission's "fee disclosures are the most transparent in the nation," by including performance fees that most public pension funds don't report as well as other "noninvoiced" expenses such as legal costs and taxes that no other fund reports.

Still, Funston agrees the agency's management costs exceed its peers and are the highest among 21 state public pension funds with an average portfolio of $29 billion. That's due to the agency's heavy weighting to alternative investments - those not stocks or bonds, such as hedge funds and real estate - that inherently come with higher management fees. But when compared with other pension funds with similar investments, the fees South Carolina pays are "normal and not excessive," the report reads.

"In other words, 'apples to apples,' RSIC is not overpaying for its asset allocation," the firm wrote, responding to an April 12 letter from Loftis disagreeing with its conclusions.

Loftis has raised legitimate concerns about the effectiveness of the strategy and the commission's speed at improving staffing, systems and controls, and the commission has responded with many improvements, the report said.

"The tough stands I took over the past three years were needed to protect the people's money. Because I made difficult decisions, the people's money is safer today," Loftis said.

Until a 2007 change in the state constitution, the fund could invest only in stocks and bonds. The commission then diversified quickly and, in response to 2008 losses, intentionally emphasized alternative investments that come with less risk of being hurt by major stock market fluctuations. That meant the fund didn't benefit from the stock market recovery, the report explained.

Whether the investment strategy is correct is the commission's responsibility, it said.

The report lists pages of recommendations for both the commission and the Legislature.

That includes clarifying responsibilities. South Carolina's pension investment board has one of the most complex governance structures in the nation, which contributes to the feuding between the treasurer and commission. However, Funston said, the Legislature clearly gave the commission authority over investment decisions, not any single commissioner, including the treasurer.

Questions about that authority led to an unprecedented lawsuit before the state Supreme Court last year.