With seven of the 11 Chicago-area pension funds signed onto his aggregated fee proposal, Chicago Treasurer Kurt Summers plans to launch a clearinghouse for the plans to share investment manager fee data and work together to secure lower fees.
While a number of pension funds are invested with the same managers and in some instances the same strategy, these investments and their associated fees are not considered in aggregate, with one pension fund sometimes paying more than another and driving up the overall cost.
By negotiating with managers to secure aggregated pricing, the $144 million paid to investment managers across all 11 pension funds annually could be reduced by $25 million to $50 million, Mr. Summers said in a telephone interview Tuesday.
Currently, there are 236 unique managers across all the pension funds. Managers who work for more than one local fund represent about 80% of the assets across all the funds and 75% of all fees paid.
Money managers that have already agreed to provide aggregated pricing include Morgan Stanley and Chicago-based Mesirow Financial.
Over the next few weeks, information requests will be sent to the pension funds to start building an online database, which will be accessible to the public in addition to pension fund officials and trustees. It is anticipated the clearinghouse will be accessible on the treasurer’s website in the first quarter of 2016.
Pension funds that have already agreed to participate are the $5.1 billion Chicago Municipal Employees’ Annuity & Benefit Fund; $2.9 billion Chicago Policemen’s Annuity & Benefit Fund; $1.9 billion Chicago Transit Authority Employees Retirement Plan; $1.4 billion Chicago Laborers’ Annuity & Benefit Fund; $1 billion Chicago Firemen’s Annuity & Benefit Fund; $748 million Chicago Transit Authority Retiree Health Care Trust; and $424.5 million Chicago Park Employees’ Annuity & Benefit Fund.
A spokesman for the Chicago Public School Teachers' Pension & Retirement Fund, which has not yet formally signed onto the proposal, could not immediately be reached for comment. The $10.4 billion pension fund is the largest Chicago-area retirement plan.
Mr. Summers’ aggregated pricing proposal was initially announced in December as part of his larger 90-day action plan to improve Chicago’s financial standing, including giving consideration to Chicago-centric investments and emerging managers, among others.
Similar fee pricing initiatives have already been adopted in New York City and Los Angeles, among other cities.
