CalPERS’ infrastructure consultant cuts fees

CalPERS has appointed a lead infrastructure consultant from its list of four shortlisted candidates that included Meketa Investment Group, Pension Consulting Alliance, RV Kuhns and Wilshire, with the appointed consultant offering a reduced fee structure as part of its contract.

Meketa Investment Group was appointed the lead infrastructure consultant starting from the beginning of January next year, cutting 15 per cent of its proposed annual fee.

It originally proposed an annual fee of $125,000 that was reduced by 15 per cent to meet the State of California’s directive to reduce state contract costs. The new proposed annual fee is $106,250.

In November a working group of investment committee members conducted interviews with the four finalists, with Meketa awarded the contract because of its proposal, presentation and responses to questions demonstrated their experience and skill in providing investment advice around infrastructure investing services.

Meketa originated by providing investment strategy and systems advice to the Harvard Management Company and was hired by its first pension fund client in 1978. It now consults for about $250 billion in institutional assets.

Meketa also has a collaborative relationship with Stanford University to focus on global infrastructure development, finance and policy.

This Global Infrastructure Forum brings together several experts with broad backgrounds in infrastructure, who will provide strategic information to Meketa on its infrastructure investment services. Meketa will also partner on specific research projects with the Collaboratory for Research on Global Projects, a leading multi-disciplinary infrastructure research centre at Stanford University.

While CalPERS had an initial target of 5 per cent in inflation linked it currently only has a market exposure of 2.3 per cent, or $4.6 billion.

CalPERS is also underweight real estate (6.9 per cent versus 10 per cent), alternatives (11.6 per cent versus 14 per cent) and cash (1.4 per cent versus 2 per cent). At the end of October its major overweight position was global fixed income (24.6 per cent versus 20 per cent).

CalPERS can invest up to 3 per cent of total assets in infrastrucuture, which forms part of the inflation-linked asset class, created in 2007 as the fund’s fifth asset class. The other four are global equity, flobal fixed income, alternative investment management and real estate.

The ILAC program has a target allocation of up to 5 per cent of the total CalPERS market value, and includes commodities, inflation-linked bonds, infrastructure and forestland. For inflation the fund has targeted an average annual investment return of 5 per cent over the rate of inflation, net of fees, over five years