US Pension Operating Costs Jump 10%
Pension fund operating costs now average almost 0.4% of
total assets, according to new research by the Callan
Investment Institute, an IPE news report said
Among the factors affecting a fund’s expenses, according to
Callan, are:
- fund size
- percent invested in active versus passive management
- the number of managers and their mandate sizes
- percent allocated to non-traditional investments
- type of fund.
Internal and/or passive management can result in lower
costs, though this can be offset by higher compensation
figures, Callan said.
As for fund size, the larger funds paid less due to the
scaling of investment management fees. Public funds paid
17% less than corporate funds, because investment
management fees are lower once asset allocation,
active/passive strategy and mandate size is taken into
account.
Non-traditional assets such as private equity and real
estate are subject to “significantly higher fees” the
Callan report says. Among traditional assets, domestic
equity mandates result in the highest fees.
The survey polled 74 endowments and foundations, corporate funds and public funds. Some 48% of respondents had more than one billion dollars in total assets.
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