The California Public Employees' Retirement System is developing plans to shift as much as $30 billion from external to internal managers as it seeks to reduce fees.
The $305.5 billion system now oversees about 70% of its assets internally, most in stocks and bonds, a share that can increase as CalPERS develops capacity to handle private equity, real estate and infrastructure, according to Chief Investment Officer Ted Eliopoulos.
“I think 75, maybe 80%” is the long-term goal, Mr. Eliopoulos said in a Bloomberg Television interview in Sacramento. “It's a big deal.”
The shift would cut fees paid by the system as it reduces the outlook for investing returns amid low interest rates and slow economic growth. The CalPERS board voted last month to decrease its assumed long-term annual rate of return to 7% from 7.5%. Over the next 10 years, it may average gains of 6.2%, according to Wilshire Associates, an outside consultant.
CalPERS spent $279.2 million in fiscal 2016 for external managers, including $178.6 million in fees for oversight of real assets, according to its annual report released this month. It also paid outside managers $344.7 million in performance fees.