The California Public Employees’ Retirement System (CalPERS) says costs for its investment operations have declined.
In its review, the cost to manage the portfolio for fiscal year 2012/13 was found to be approximately US$1.3 billion, a decrease of US$80 million during the last two fiscal years. Contributors to the savings include a focus on reducing external management fees and the number of external consultants, as well as insourcing many management functions.
CalPERS also reported that it was found to be “cost-advantaged” in a CEM Benchmarking survey, when measured against its peers.
“The CalPERS investment office strives to always be acutely aware of costs, cost drivers and effective cost management strategies,” says Ted Eliopoulos, CalPERS interim chief investment officer. “The recognition from CEM and our own internal findings tell us that we’re on the right path, but cost-effectiveness is something that we must continue to diligently monitor in all areas of our operations.”
CEM, an independent provider of benchmarking information, found that the cost to manage the CalPERS portfolio was $136 million lower than its peers. CEM cited internal management of public assets, passive management of equities and lesser use of fund-of-funds as contributors to the cost savings.
The survey analyzed cost data at 14 large U.S. and global pension funds to create a benchmark cost figure. The benchmark figure is constructed to reflect what costs peers would incur if they had the same asset allocation mix as CalPERS. The pension fund was deemed cost-advantaged when comparing CalPERS actual cost data against the benchmark.
CalPERS is the largest public pension fund in the United States, with more than US$285 billion in assets.
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