U.S. Pensions Should Be More Transparent on Alternatives: Report


When it comes to alternative investments and management fees, public pension funds in the U.S. could improve their level of transparency, according to a new report from Pew.

The report makes several recommendations for improving transparency, including making investment policy statements more accessible and implementing comprehensive fee reporting standards.

More on the report, from BenefitsPro:

Researchers looked at the fee disclosure policies of the 73 largest funds, which collectively account for $2.9 trillion, or 95 percent of all public pension assets.

While all of those plans receive disclosure guidance from the Government Accounting Standards Boards, states are left to their own devices when it comes to interpreting and implementing that guidance.

In 2013, state pensions allocated 25 percent of assets to alternative investments like private equity and hedge funds, or more than twice the 11 percent that was invested in alternatives in 2006.


The Pew brief calls for comprehensive reporting standards that would include all the costs of alternative investments, including carried interest earned by private equity managers.

It also recommends all pensions make investment policy statements available online, and disclose funds’ returns both net and gross of fees. Of the funds it reviewed, 37 percent reported returns gross of fees, meaning they did not deduct management costs.

Pew’s brief also recommends reporting performance by asset class, and expanding performance history to 20 years.

Read the report here.


Photo by thinkpanama via Flickr CC License

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