CalPERS has negotiated about $20 million in annual cost savings through a reduction of fees in its alternatives manager program and millions saved through a renegotiated contract with UBS.
UBS is a third party advisor to the absolute return strategy program, alongside PAAMCO.
According to a presentation to the investment committee by chief investment officer Joe Dear, a cost saving of $6 million was achieved through a renegotiated UBS contract.
A reduction of fees and costs in the alternative investment manager program also achieved annual cost savings of $7.4 million.
In addition, the removal of underperforming managers and renegotiated manager fees in global equities achieved an expected annual savings of $7.5million.
Improving cost effectiveness is one of the overarching priorities of the fund’s “investment roadmap”.
In the next six months the fund will complete benchmarking the investment office’s costs, staffing and resource structure against comparable organisations. It is working with CEM Benchmarking.
The fund outlined a set of priorities it will deliver over the next six months which, in addition to cost effectiveness, also include the development of a forestland strategic plan, a final implementation plan for its ESG strategy and the rollout of a new risk management program.
In addition to strategic plans, the fund has a number of execution-related priorities for the next six months. These include the alternative investment management division finalising two separate account mandates, and the real estate team finalising agreements with core partners.
Some of the investment highlights in the past six months include completing the implementation of a new asset allocation framework, insourcing $8 billion in global fixed income assets, and funding and managing a new $7 billion liquidity portfolio.
In the past six months the fund also formed an investment compliance and operational risk division and held a sustainable investing workshop with the investment committee regarding the integration of ESG factors.
The overriding investment roadmap strategic priorities are: achieve investment performance targets; establish new capital allocation framework; strengthen risk management; strengthen organisation systems and controls; improve cost effectiveness; and enhance talent management.
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