CalPERS Cut Investment Expenses by $217 Million in ‘15, Aided by Hedge Fund Sell-Off

CalPERS cut its investment expenses by $217 million in fiscal year 14-15, according to the pension fund’s just-released annual report.

The fund is in the midst of a years-long project that aims to reduce the complexity and cost of its investment portfolio. CalPERS’ highly-publicized exit from hedge funds was part of that initiative, as was its decision earlier this year to cull its private equity managers and consolidate its PE investments.

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“We have continued to examine the portfolio to ensure its efficient management, and to look for ways to reduce risk, complexity, and costs,” said CIO Ted Eliopoulos. “During the 2014-15 fiscal year this was witnessed by the elimination of CalPERS’ hedge fund program, and through the diligent work to negotiate more favorable terms for CalPERS with our external managers. In the 2014-15 fiscal year we saved $217 million from these and other efforts.”

Eliopoulos added that longer-term numbers suggested “the work undertaken over the past several years to restructure the investment portfolio and reduce costs and complexity is bearing fruit.”

The “elimination” of CalPERS’ $4 billion Absolute Return Strategies (ARS) program in September 2014 was followed by plans to cut the number of private equity managers by two-thirds. At the end of June 2015, ARS accounted for 0.4% of the portfolio according to the annual report—down from 4% at the time the cull was announced.

CalPERS missed its investment target, returning 2.4 percent for the 12-month period of July 1, 2015 – June 30, 2015.

Photo by  rocor via Flickr CC License