Orange County Employees Retirement System, Santa Ana, Calif., on Wednesday approved a resolution supporting more widespread use of pension fund share classes for alternative investments and broader use of hard hurdles for performance fees, confirmed Girard Miller, chief investment officer of the $11 billion pension fund.
The resolution encourages money managers that use performance-based fees to first reward pension fund limited partners for the use of their capital and allow the general partner to share in returns only after certain performance benchmarks have been met. Pension fund share classes would provide all public pension plans incrementally greater fee discounts in recognition of economies of scale.
OCERS’ resolution was modeled after a suggested model published by the Government Finance Officers Association of the U.S. and Canada in the February 2014 issue of Government Finance Review, written by Mr. Miller. The resolution and Mr. Miller’s article have been distributed to CIOs throughout the state and around the country.
OCERS is the first pension fund to adopt the resolution, Mr. Miller wrote in an e-mail.
“This resolution offers a template to public pension fund CIOs and their governing bodies to similarly express a widespread view throughout our profession that something needs to be done about fees,” Mr. Miller said in a news release.