Public Pensions Pushed Fees Lower, Improved Funding in 2016: Report

NCPERS 2016 Public Retirement Systems Study

NCPERS 2016 Public Retirement Systems Study

Public pension funds achieved lower investment and administrative expenses in 2016, according to an NCPERS study of 159 public funds.

The funds decreased their fees by only 4 basis points; but this trend was coupled with another year of improved funding ratios.

From the study:

Responding funds report the total cost of administering their funds and paying investment managers is 56 basis points (100 basis points equals 1 percentage point.) This is a decrease of four basis point from 2015. According to the 2016 Investment Company Fact Book, the average expenses of most equity mutual funds average 68 basis points and hybrid mutual funds average 77 basis points. This means funds with lower expenses provide a higher level of benefit to members (and produce a higher economic impact for the communities those members live in) than most mutual funds.

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While the respondent pool between studies has fluctuated, the general theme is funds have reduced fees the last few years by automating processes, gaining workflow efficiencies and negotiating fee structures with investment managers.

On funding:

For the third consecutive year, responding funds experienced an increase in average funded level. The aggregated average funded level is 76.2, up from 74.1 in 2015 and 71.5 in 2014. While 1-year investment returns were not strong in 2015, almost 70 percent of responding funds have investment smoothing periods containing strong investment returns from the 2012, 2013 and 2014 fiscal years. In addition, funds continue to lower amortization periods which lowers the amount of time to fully fund the plan.

The full study can be viewed here.

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