CalPERS earned 3.3% for the fiscal year to date March 31, an annualized 6.9% for 10 years and 7.5% for the 20 years ended the same date, said Marcie Frost, CEO of the $456.7 billion pension plan in reporting preliminary returns at Tuesday's board meeting.
By comparison, California Public Employees' Retirement System, Sacramento, reported a -11.2% net return for the one year, an annualized net 5% for the five years and 7% for the 10 years ended Dec. 31.
Also on Tuesday, the board approved the fiscal year 2024 budget of $2.4 billion, up 11.1% from the current fiscal year 2023 budget. CalPERS' fiscal year starts July 1.The staff reported that most of the difference was due to an increase in external management investment fees due to a shift toward more active management and increased investment in alternative investments, Jennifer Hamarlund, CalPERS' interim chief financial planning, policy and budgeting division, told the finance committee Monday. The fiscal year 2024 budget anticipates estimated total fees of $1.3 billion, a 17.1% increase from the current fiscal year.
Much of the increase comes from base fees for real assets and private debt, with additional, but smaller increases, expected for fixed income, private equity and global equity, Ms. Hamarlund said Monday. A projected increase in real assets performance fees is driven primarily by infrastructure investments, she added. CalPERS had $210.1 billion in global equity, $105 billion in fixed income, $73.7 billion in real assets, $50.3 billion in private equity and$8.9 billion in private debt as of Dec. 31, according to its most recent investment report.
In response to questions about the investment fees during the finance committee meeting, Michael Cohen, CalPERS' interim chief operating investment officer, said that while the "increase in proposed fees is significant," it reflects the asset allocation CalPERS adopted a year ago.
"So, to some extent ,seeing the fees increase is a good thing, it's showing that we are getting the money deployed the way you expected, that more money is going to the private assets," Mr. Cohen said. "That being said, to get to the heart of your question, certainly we want to reduce fees to the greatest extent possible."
One way to do this is by bringing "as much expertise into the investment office as possible to either … stabilize or long term bring down those fees."
