Internal vs. External Management for State and Local Pension Plans

Jean-Pierre Aubry and Kevin Wandrei

No 75, State and Local Pension Plans Briefs from Center for Retirement Research

Abstract: As the types of assets in which state and local pension plans invest has expanded, so have the number of external asset managers that plans use. However, due to concerns about fees and recent questions about the value of active management, some large public plans have begun to reevaluate the size of their external management teams. CalPERS, Wisconsin RS, and Nevada PERS are examples of large plans that have recently consolidated their external management team as part of an overall commitment to reduce investment fees, which cut into their after-fee returns. This brief documents the trends in the number of external asset managers used by public pension plans and examines the relationship between external management and fees. The aim is to assess how the recent commitment by some plans to rely on fewer external managers might impact investment performance going forward.

Pages: 8 pages
Date: 2020-11
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