For Immediate Release - January 27, 2016

PERAC Releases Fund Fee Report

Retirement Board Investment Fees Exceed $400 Million

Boston The Public Employee Retirement Administration Commission (PERAC) released a Report on Investment Expenses of Retirement Boards for 2014 pdf format of 2014 Schedule 7 Fee Report
file size 10MB indicating that spending for managing retirement funds in the state exceeded $400 million. That Report for the first time details the expense associated with the investment of nearly $75 Billion in assets.

“PERAC, in its oversight of the public retirement systems in Massachusetts, is firmly committed to transparency," observed Executive Director Joseph E. Connarton, “and we believe that one of the most important areas for full disclosure is cost.”

The Report details the management, custodian and consultant fees for each public pension system as reported in the system’s Annual Statement of Financial Condition for 2014.  For the State and Teachers’ retirement funds, which are invested by the Pension Reserves Investment Management Board (PRIM), $255 million in fees were incurred.  Local retirement boards paid $150 million to money managers, banks and investment consultants as well as PRIM.

“The SEC and officials across the country are scrutinizing every aspect of fund management," Connarton said, “and fees charged to pension funds are a priority." However, as the Report notes, there are any number of costs that reduce the value of an investment that are not part of direct fees.  These include “carried interest” in various partnerships where the manager receives 20% of the gains, “deferred load” payments, redemption fees  and 12b-1 marketing fees in mutual funds, and other expenses that impact the value of the retirement board investment.”

The $255 million for the investment of state funds with PRIM was allocated between the State Employees’ Retirement System ($123 million) and the Teachers’ Retirement System ($132 million).  Boston reported fees of $25.7 million on $4.2 billion in assets as well as an additional $7.5 million for investment of $1.5 billion in Boston Teachers’ retirement assets with PRIM.

    Several local retirement boards that invest on their own include Haverhill ($1.5 million of fees on an asset base of $173 million); Holyoke ($1.9 million of fees on an asset base of $232 million); MWRA ($3.5 million of fees on an asset base of $442 million); Norfolk County ($6.3 million of fees on an asset base of $776 million); Plymouth ($1.2 million of fees on an asset base of $145 million); Lexington ($1.1 million of fees on an asset base of $138 million); Bristol County ($4.0 million of fees on an asset base of $582 million); Falmouth ($874 thousand of fees on an asset base of $114 million); Hampshire County ($2.0 million of fees on an asset base of $258 million); MHFA ($832 thousand of fees on an asset base of $113 million); New Bedford ($2.0 million of fees on an asset base of $284 million); Norwood ($998 thousand of fees on an asset base of $138 million); Plymouth County ($5.9 million of fees on an asset base of $836 million); Taunton ($1.8 million of fees on an asset base of $263 million); Watertown ($1.0 million of fees on an asset base of $134 million); Webster ( $244 thousand of fees on an asset base of $30 million); Worcester ( $5.2 million of fees on an asset base of $818 million); Worcester Regional ($3.2 million of fees on an asset base of $550 million); and Woburn ($980 thousand of fees on an asset base of $129 million).

The full report, 2014 Schedule 7 Investment Fees pdf format of 2014 Schedule 7 Fee Report
file size 10MB, can be downloaded from PERAC's website, mass.gov/perac. If you have any questions or comments, please contact Thomas O'Donnell, PERAC's Compliance Officer, at 617-666-4446, extension 922. 

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