Investing

CalPERs Investment Office Continues to Cut Expenses

CEM Benchmarking found that the annual cost to manage the CalPERS portfolio was approximately $52 million lower than its peers.

By Rebecca Moore editors@plansponsor.com | May 19, 2016

The California Public Employees' Retirement System (CalPERS) reported that annual ongoing costs for its investment operations have declined by approximately $134 million for the five-fiscal-year period from 2010-15.

This compares to last year’s report that annual ongoing costs for its investment operations declined by approximately $90 million for the five-year period from 2009 to 2014.

In the System's review, the cost to manage the portfolio for Fiscal Year 2014-15 was approximately $1.4 billion, with external management fees contributing 91% of that figure. When excluding profit sharing fees to external managers, which can be volatile, the annual ongoing cost to manage the portfolio decreased by $44 million during the last fiscal year, and by $134 million over the past five fiscal years.

Contributors to the savings include transitioning assets from external managers to internal management when possible, reducing external management fees, and decreasing the number of external consultants and advisors.

CEM, an independent provider of objective benchmarking information, found that the annual cost to manage the CalPERS portfolio was approximately $52 million lower than its peers. CEM cited internal management of public assets, index-oriented management of equities, and lesser use of fund-of-funds as contributors to the cost savings.

"Reducing cost is a priority at CalPERS, as outlined in our Investment Beliefs," says Henry Jones, CalPERS Board Vice President and Investment Committee chair.

"We continue to identify ways to reduce cost without compromising quality or efficiency," adds Ted Eliopoulos, CalPERS' chief investment officer. "I am thankful these efforts are making an impact, and I am optimistic we will continue to make meaningful reductions in the future."

To learn more, view the CalPERS Investment Cost Effectiveness Analysis - Summary of Results.

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