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CalPERS pays more in fees as it cuts real assets managers

The US’s largest public pension disbursed more in forestry expenses during the fiscal year ended 30 June despite disappointing performance.

The California Public Employees’ Retirement System had a 5 percent rise in net private real asset management fees over the past year amid efforts by the pension to reduce investment costs.

The increase in disbursed fees extended to timberland, with $7.3 million and $2.8 million paid to Lincoln Timber and Sylvanus, respectively, compared with $5 million and $2.3 million last year.

This did not apply to fees paid to Meriwether Farms, which decreased from 842,000 to 322,000.

The US’s largest public pension paid $187.1 million in net management fees across 76 real assets funds in the fiscal year ended 30 June, up from $178.6 million over 112 funds in 2015-16, according to its 2016-17 annual report published on Friday.

Performance fees for real assets funds dropped drastically over the last fiscal year, from $279.3 million in 2015-16 to $56.6 million in 2016-17. CalPERS did not pay performance fees to its timberland managers for either year.

The news comes amid disappointing performance for the asset class at the pension. In July, CalPERS announced timberland returns of 1 percent, -3.1 percent and -0.1 percent over the year to 30 June, three years and five years respectively, missing benchmarks by 2.68 percent, 8.75 percent and 7.26 percent.

CalPERS decreased its investment expenses by $169.9 million in 2016-17, more than double the $67 million of savings generated the previous fiscal year, its annual report noted. The latest reduction more than doubles its total investment savings to approximately $281 million since 2010-11.

The pension attributed the savings in part to “focuses on reducing cost, complexity, risk and fewer but more strategic partnerships with external investment managers.” Reductions also came through discussions with general partners, limited partners and other agencies regarding cost-effective, transparent and risk-aware portfolio management.

Additional reporting by Alex Lynn