Chicago Treasurer Launching Clearinghouse for City Pension Funds to Secure Lower Fees

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Chicago Treasurer Kurt Summers announced in 2014 his plans to improve the efficiency of the city’s pension funds by working to facilitate lower management fees in cases where two or more pension funds are invested with the same manager.

The details of the plan are now surfacing; Summers will launch a database where the funds can share management fees and use that information to secure discounts from investment managers.

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While a number of pension funds are invested with the same managers and in some instances the same strategy, these investments and their associated fees are not considered in aggregate, with one pension fund sometimes paying more than another and driving up the overall cost.

By negotiating with managers to secure aggregated pricing, the $144 million paid to investment managers across all 11 pension funds annually could be reduced by $25 million to $50 million, Mr. Summers said in a telephone interview Tuesday.

Currently, there are 236 unique managers across all the pension funds. Managers who work for more than one local fund represent about 80% of the assets across all the funds and 75% of all fees paid.

Money managers that have already agreed to provide aggregated pricing include Morgan Stanley (MS) and Chicago-based Mesirow Financial.

Over the next few weeks, information requests will be sent to the pension funds to start building an online database, which will be accessible to the public in addition to pension fund officials and trustees. It is anticipated the clearinghouse will be accessible on the treasurer’s website in the first quarter of 2016.

Seven of the city’s 11 pension funds have signed on.

 

Photo by bitsorf via Flickr CC License

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