The $300 billion profit-to-member fund has linked up with Oxford Properties for a portfolio of high-quality European industrial and logistics assets that it wants to expand significantly over the next three to five years.
Australia’s megafunds are looking to international asset owners for ideas on how to invest what will soon be trillions in retirement savings. But banks – with their sharp focus on efficient implementation and balance sheet management – could also be a source of inspiration.
Lessons for Aussie funds as CalPERS cuts more managers
(pictured: Wylie Tolette)
It may be three times bigger than Australia’s largest super fund, but there are still lessons to be learned from its investment and operational strategies by big Australian investors. Here’s why, and how, CalPERS has cut its manager roster by more than 25 per cent.
The US$302 billion Californian public sector fund, which is mostly defined benefit accounts, disclosed after its monthly investment committee meeting last week how it had cut its overall cost of investment management in the past five years. This has been primarily from insourcing investments.
According to Asset International’s ‘CIO Alert’ newsletter, the fund has gone from spending US$911 million between 2009 and 2010 on management fees to US$750 million in 2014-2015. Total portfolio costs, excluding performance fees, have dropped from US$1.02 billion to US$888 million over the same five years.
The fund said it would now look for “alternative ways” to invest in “private asset classes” which currently accounted for nearly 90 per cent of its fee spend. The fund had cut management fee expenses by US$161 million in the last five years by bringing assets inhouse, despite the total fund assets nearly doubling in size during that time.
CalPERS has reduced the number of external managers used from 212 to 159 since 2014 and aims to get this number down to about 100.
‘CIO Alert’ quoted Wylie Tollette, CalPERS chief operating investment officer, as saying: “We need managers’ help to execute the goals of our program… However, we want to make sure those managers are strategically aligned with the objectives and the mission of CalPERS.”
Private investments accounted for 88 per cent of eternal management costs and this would be the focus of further cost savings. The fund currently manages about 68 per cent of its assets internally.
Australia’s largest fund, Australian Super, which currently manages about A$90 billion, is half-way through a program to internalise the management of about one-third of its assets. Other big funds, including UniSuper, which is already past that level, and REST, Sunsuper, and others are going down the same path.
