CalPERS investment costs better than its peers, but boosting co-investments can be expensive

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CalPERS’ investment cost, excluding private asset performance fees and transaction costs, was 20.2 basis points, 14.3 basis points below that of its peer group as of December 31, 2020. said Tom Scheibelhut, product innovation manager at CEM Benchmarking, at a CalPERS committee on Tuesday. .

The reason CEM determined that the $439.8 billion California Public Employees’ Retirement System, Sacramento, has a relatively inexpensive investment program is that 57% of its portfolio was indexed. , versus 33% for a peer group of 15 of the world’s largest assets. owners, and CalPERS paid 7.6 basis points less than peers for similar styles and implementation services, Scheibelhut said.

One type of lower-cost investing that CalPERS says is a “strategic priority” are private equity co-investments, which Scheibelhut says generally outperform other investment styles, including mixed funds. and funds of funds, but not yet by a “statistically significant” amount. .

Co-investments represent 6.8% of CalPERS’ limited partnerships, compared to an average of 22.3% for its largest global peers, he said. But he warned that the global leader’s peer percentage is likely to drop due to the current popularity of co-investments as a cheaper way to invest in private equity, Mr Scheibelhut said.

“Suddenly everyone wants to participate in co-investments”, and so there are now a number of co-investment vehicles on the market, many of which cost more than a typical direct co-investment, did he declare.

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