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DEFINED BENEFIT

CalPERS pays $1.47 billion in portfolio management costs, in line with previous fiscal year

CalPERS paid $1.473 billion to manage its portfolio in the fiscal year ended June 30, a savings of $11 million from the previous fiscal year, shows an internal analysis to be presented at the pension fund's investment committee on May 15.

The bulk of the money went to external managers but $65 million was for CalPERS' investment office operating expenses and equipment.

The data come as the $318.9 billion pension fund is embarking on a plan to significantly reduce its number of external managers and its external management costs by 2020.

The Sacramento-based system is also building its internal management capabilities. About 80% of its $150 billion equity portfolio and 90% of its $58 billion fixed-income portfolio are managed in-house.

Chief Investment Officer Ted Eliopoulos wants around 100 external managers by 2020, less than half of the number of external managers in 2015.

Performance fees to external managers were the largest overall expense for the California Public Employees' Retirement System. The biggest contribution was $490 million, which was performance fees to private equity managers. CalPERS also paid $279 million in performance fees to real assets managers, which include real estate partnerships, and $54 million for managers in public asset classes.

Total external management fees for CalPERS totaled $500 million. Of those base fees, $400 million was paid to private market managers, with $100 million was paid to public asset class managers.

Full disclosure of private equity fees has been an on-going controversy at CalPERS because the retirement system did not report performance fees until 2015. Critics have charged that the full cost of CalPERS fees were masked by the lack of full reporting.

The current private equity fees reported by CalPERS do not include private equity fee offsets or private equity partnership fees of approximately $75 million, the CalPERS data shows. Further information could not be learned by press time.