FRESNO COUNTY EMPLOYEES RETIREMENT ASSOCIATION INVESTMENT MANAGER FEE STUDY

Transcription

1 FRESNO COUNTY EMPLOYEES RETIREMENT ASSOCIATION INVESTMENT MANAGER FEE STUDY Jeffrey J. MacLean Senior Consultant SEATTLE 999 Third Avenue Suite 4200 Seattle, Washington telephone facsimile LOS ANGELES 2321 Rosecrans Avenue Suite 2250 El Segundo, California telephone facsimile

2 2008 CEM Benchmarking Inc. Survey At the November 4 th, 2009 meeting the 2008 Defined Benefit Investment CEM Benchmarking Survey was presented. The survey showed FCERA s Plan as having an excess cost of 9.7 basis points versus the CEM benchmark cost. As a result, Wurts & Associates was asked to benchmark FCERA s manager fees to see how they compare to fees being paid by other plan sponsors. The CEM Survey is a good estimate of manager fees. However, the excess cost calculation doesn t take into account the following: Differences in how the various types of plan sponsors answer the questions in the survey. Differences in specific asset class and investment style costs between your fund and similar sized plan sponsors. Differences in the number of managers you use versus similar sized plan sponsors. Differences in implementation style (i.e., internal versus external, passive versus active). 2

3 Investment Manager Fee Study Overview In order to more accurately to benchmark FCERA s investment manager fees, Wurts & Associates conducted an investment manager fee study to compare the respective manager fees to managers of similar investment style and mandate size. Wurts & Associates gathered data as of 12/31/09 for FCERA s investment managers to compare to the median manager in the respective asset class, investment style, and mandate size using the evestment Alliance database. The evestment Alliance results do not take into account performance-based fees. So the tiered fee schedule FCERA currently has in place with each manager was used to calculate FCERA s fees for comparison purposes. evestment Alliance Disclosure: The following fees are calculated using the published fee schedule supplied to the ease Database. evestment Alliance does not warrant the accuracy of the fee schedule information and all calculations are intended strictly for comparative and analysis purposes. The calculated fees do not consider account availability, minimum account sizes, minimum annual fees, negotiated rates, performance-based fees or other account specific considerations. 3

4 Investment Manager Fee Study Results as of 12/31/09 Asset Class Assets ($000's) as of 12/31/09 FCERA Manager Fees ($000's) as of 12/31/09 FCERA Manager Fee (%) Respective ea Universe Median Fees* (%) Difference (FCERA Fees- Universe Median) Equity Managers S&P 500 Flagship Passive Large Cap Core $142,558 $ % 0.09% -0.06% INTECH Large Cap Growth $144,518 $ % 0.53% -0.05% SSgA R1000G Index Passive Large Cap Growth $97,473 $ % 0.06% -0.03% AJO Large Cap Value $162,281 $ % 0.50% -0.20% Wellington Large Cap Value $143,665 $ % 0.50% -0.18% Kalmar Small Cap Growth $115,431 $ % 0.82% -0.04% SSgA R2000V Index Passive Small Cap Value $108,801 $ % 0.08% -0.03% Franklin Templeton Int'l. Large Cap Equity $192,417 $ % 0.63% -0.15% Oechsle Int'l. Large Cap Equity $148,981 $ % 0.63% -0.06% Mondrian Int'l. Small Cap Equity $157,789 $1, % 0.89% -0.24% Mondrian Emerging Market Equity $101,769 $ % 0.90% -0.16% Fixed Income Managers Blackrock Core Plus Fixed Income $108,769 $ % 0.30% -0.05% WAMCO** Core Plus Fixed Income $174,594 $ % 0.30% -0.07% Loomis Sayles Core Plus Fixed Income $160,014 $ % 0.30% -0.10% Loomis Sayles Opportunistic Fixed Income $82,856 $ % 0.49% -0.11% Standish Mellon Opportunistic Fixed Income $81,663 $ % 0.49% -0.11% GMO Global Fixed Income $56,963 $ % 0.40% -0.06% MetWest TALF TALF $28,665 $ % N/A N/A PIMCO TALF TALF $24,554 $ % N/A N/A SSgA TIPS Passive TIPS $47,928 $ % 0.20% -0.16% Alernative Managers Blackstone Alternative As Hedge Funds $14,864 $ % 1.00% 0.25% Grosvenor Hedge Funds $51,295 $ % 1.00% 0.15% Common Sense Hedge Funds $34,506 $ % 1.00% 0.50% Hamilton Lane Private Equity $29,856 $ % 1.00% -0.10% New Mountain Partners Private Equity $9,195 $ % 1.00% 0.50% Lone Star Private Equity $13,329 $ % 1.00% -0.30% Blackstone Private Equity $19,687 $ % 1.00% -0.25% BCI Growth Private Equity $3,488 $ % 1.00% 0.50% Landmark Equity Private Equity $4,738 $ % 1.00% 0.00% TCW Shop Private Equity $7,883 $ % 1.00% 0.00% Warburg Pincus Private Equity $31,757 $ % 1.00% 0.50% Real Estate Managers INVESCO Real Estate $49,486 $ % 0.75% 0.15% Sentinel Real Estate $2,798 $ % 0.75% 0.25% TA Realty Real Estate $8,293 $ % 0.75% 0.05% JER Partners Real Estate $846 $ % 0.75% 0.75% JMB Heitman Real Estate $9 $0 0.75% 0.75% 0.00% Colony Capital Distressed Credit $8,374 $ % N/A N/A Total $2,572,093 $11, % *The ea Universe used for the SSgA R2000 Value Index Fund was the Passive Small Cap Universe. The ea Universe used for the Opportunistic Fixed Income manager s was ea the High Yield Fixed Income Universe. The ea Universe used for the Alternative Managers was the Alternatives/Hedge Funds Universe which includes various types of strategies and direct hedge fund managers. The ea Universe used for the Real Estate Managers was the REIT/Real Estate Manager Universe. **WAMCO has a performance-based fee which was actually 0.18% 4

5 Summary In terms of investment manager fees, FCERA pays less than the median Plan Sponsor in all traditional asset classes (Domestic Equity, International Equity, and Fixed Income) when the implementation style, investment style, and mandate size are taken into account. FCERA pays more than the median manager in the ea Alternatives and Real Estate Universes. However, the median fees for these two Universes are may not be ideal Universes for comparison as they include multiple types of strategies and direct investments where FCERA has used a fund of funds approach which does entail additional fees. Overall Wurts & Associates believes FCERA is paying acceptable fees for their investment managers and their respective mandates. 5