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Alternative Market Briefing

Public pension funds trim costs to improve efficiency

Tuesday, January 28, 2020

Laxman Pai, Opalesque Asia:

Public retirement systems managed to cut down their administrative and investment expenses and took other cost-efficiency measures in 2019, said a survey.

The majority (62 percent) of survey participants with assets exceeding $1.4 trillion in actuarial and market value were local pension systems while the remaining 38 percent were statewide systems, said the 2019 NCPERS Public Retirement Systems Study, conducted with Cobalt Community Research.

In the latest fiscal year, the pension systems averaged 0.55% in administrative costs and investment manager fees, down from 0.6% the year before.

"Pension systems are constantly looking for ways to strengthen their performance and provide a secure income for millions of public servants," said Hank H. Kim, executive director and chief counsel of NCPERS.

During their most recent fiscal year, pension systems reduced their costs to administer funds and pay investment managers to an average of 55 basis points (0.55 percent), down from 60 basis points (0.6 percent) a year earlier. (One hundred basis points equal one percentage point.)

According to the survey, funds reported one-year returns averaging 4.5 percent, five-year returns of 7.1 percent annually, 10-year returns of 7.7 percent annually and 20-year returns of 11.2 percent annually. The results underscore the long-term and patient nature of pension investing.

The timing of fiscal year-ends made a significant difference in investment ex......................

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