The California Public Employees’ Retirement System intends to cut ties with roughly half of the firms handling its money to reduce fees paid to investment managers, the Wall Street Journal reported.
Calpers, the largest pension fund in the United States, will tell its
investment board on June 15 that it plans to cut the number of direct
relationships it has with private equity, real estate and other external
funds to about 100 from 212, the newspaper reported.
The pullback, which would take place over the next five years, is
expected to save Calpers hundreds of millions of dollars in management
fees, the newspaper said.
The goal is “to gain the best deal on costs and fees that we can,” the newspaper quoted Calpers Chief Investment Officer Ted Eliopoulos as saying.
The $300 billion fund’s evaluation of external managers is expected
to begin next month and it will consider investing performance, the
length of the relationship and strategy, before terminating outside
firms or liquidating holdings, the Journal said.
The reduction in outside managers will not fundamentally change
Calpers’s investment strategy, or the percentage of assets managed
in-house versus externally.
The biggest cuts are expected to occur in Calpers’s private equity
portfolio, where it plans to cut the number of managers to about 30 from
100, the Journal said.
Calpers’ external money managers include private equity firms such as Carlyle Group LP, KKR & Co and Blackstone Group LP.
Calpers expects to cut outside real estate managers to 15 from 51,
while those in fixed income and global equity, which is largely managed
in-house, will drop to about 30 from nearly 60 now, the Journal said.
Calpers is expected to make the announcement public on Monday.
Reuters could not immediately reach Calpers for comment outside regular U.S. business hours.
Calpers expected to pay investment firms fees of $930.7 million in
the fiscal year beginning July 1, down from over $1 billion this year.
(Reporting by Supriya Kurane in Bengaluru; Editing by Anupama Dwivedi)