CalPERS rehired real estate consultant Pension Consulting Alliance for a new five year-contract with a caveat that PCA must reduce its proposed $6.2 million fee for the life of the contract by 15%.
After the decision Monday by CalPERS' investment committee, Allan Emkin, PCA founder and managing director, said in an interview that the firm would comply and cut its fees by 15%.
The new real estate contract is scheduled to start in April 2017.
The other finalist, Courtland Partners, had said it could do the same work for the $290.4 billion California Public Employees' Retirement System, Sacramento, for $3.9 million, a figure that actually went against them in the final decision. Investment committee members publicly questioned a team of officials from Courtland as to how they could offer the retirement system quality services at a much lower fee than PCA.
Michael J. Humphrey, managing principal of Courtland, said its main headquarters in Cleveland, where the cost of living is lower, helped the firm operate more efficiently. Mr. Humphrey said the firm would also open a Sacramento office if it was hired.
CalPERS investment committee members said the firm seemed to be giving CalPERS too good a deal in an effort to build its resume and obtain as a client the largest defined benefit plan in the U.S.
Investment committee Chairman Henry Jones and other members praised Courtland's real estate abilities but accused the firm of “pandering” to get the contract.
PCA has been CalPERS' real estate consultant since 2009.
PCA also serves as CalPERS' backup general consultant and private equity consultant. It has worked for CalPERS since 1991.