CalPERS spent $1.3 billion managing its investments in the fiscal year that ended June 30, with 90% of those costs attributable to fees paid to external investment managers, Wylie A. Tollette, the pension fund’s chief operating investment officer, told the retirement system’s investment committee meeting Monday.
Mr. Tollette presented the figures as part of an ongoing cost-effectiveness program aimed at reducing outside manager fees and shifting more assets to be managed in-house by CalPERS’ investment staff.
Mr. Tollette said the cost to manage the $285.5 billion California Public Employees’ Retirement System, Sacramento, portfolio has decreased by $80 million over the last two fiscal years.
The next biggest cost was $43.6 million, or 4% of the total cost paid, for personnel services, which included technology, data, analytics, custody and fund accounting expenses. Fees paid to consultants came in third among investments management costs. CalPERS paid consultants $26.8 million or 2% of the total.
But fees from private equity are the largest part of those external manager fees, coming in at 41%, or $476 million. Those costs do not include carry fees. A PowerPoint presented to the board showed CalPERS is currently unable to track carry fees on private equity investments.
Mr. Tollette said the pension fund is working to track such data but did not disclose a time frame.
Board member J.J. Jelincic said he had been pushing for the last 25 years for CalPERS to manage some of its private equity portfolio in-house to save on fees and will continue to push the issue. The entire CalPERS private equity portfolio is managed externally.
Another board member, Priya Sara Mathur, expressed concern about the standard carry fees, 2% and 20%, being a major “economic rent” for CalPERS, and said she would want the pension fund to manage as much money as it can internally.
