This document discusses investment management fees paid by public pension funds to external Wall Street firms. It notes that fees are often arbitrary, opaque, and expensive due to lack of accountability. Fees are typically charged as a percentage of assets under management regardless of investment performance. Only directly invoiced fees must be publicly reported. The document provides guidance on finding fee information in Comprehensive Annual Financial Reports and from pension fund websites and staff. It includes examples of calculating fees as a percentage of assets under management using data from the Los Angeles City Employees' Retirement System and exercising fee calculations for other funds.

1. Investment Management Fees:
Who Pays Them and Why
• Public pension funds often use external Wall
Street firms to manage their investments.
• Wall Street firms charge fees that are arbitrary,
opaque, and expensive. Lack of accountability
allows this extraction of wealth from communities.

2. Investment Management Fees:
How are They Charged and Reported?
• Fees charged as a percentage of investment funds
or (“assets”) under management, independent of
whether or not the managers increase the value of
the funds.
• Only those investment management fees that are
directly invoiced are required to be publicly
reported.

3. Other Investment Fees/Expenses
 Financial consultant fees
 Securities lending fees
 Performance fees
 Transaction fees
 Hidden fees

4. Finding Investment Management Fees
• Pension Fund Los Angeles City Employees’
Retirement System (LACERS) CAFR
 Visit pension fund Web site, look for annual reports
that often contain a “Schedule of Investment
Expenses”
 LACERS CAFR FY13
 Attend Board of Investments meeting at pension
fund—open to public
 Request fee information from pension fund staff

5. Finding Investment Management Fees
• City of Los Angeles CAFR 2013
• Search term “investment expense”

6. Developing Quantitative Metrics for Fees Negotiation
AUM = $1,206,895,000
Investment Management Fees = $18,050,000
IMF/AUM=.0149 (1.5%)
AUM Fees
Calculating Fees as a Percentage of Assets Under Management (AUM)

7. Exercise: Calculate fees as a percentage of AUM
1. Find fees as a percentage of AUM for Securities
Lending in the LACERS Retirement Plan
2. Find fees as a percentage of AUM for Total Real
Estate Managers
AUM Fees

8. Group Exercise 1
• Pension Fund California Public Employees’ Retirement System
(CalPERS), FY 2013
• HINT: Use Table of Contents, Find “Total Investment Management
Expenses Summary”
 What did CalPERS pay in external management fees?
 What did CalPERS pay in external performance fees?
 CalPERS total assets under management as of June 30, 2013 was
$287 billion.
 Using this total, find the total fees paid as a percentage of AUM.

9. Group Exercise 2
• Los Angeles Fire and Police Pensions (LAFPP),
FY 2013
 Find the investment expenses reported for this
pension fund in the City of Los Angeles CAFR
2013.
 How does the total investment listed in the City’s
CAFR compare to the total listed in this LAFPP
Budget FY 2013?
 What might account for the large discrepancy
between the total investment expenses listed in
the City’s CAFR and LAFPP’s budget
document?

10. How Fee Research Fits into Your Campaign
• Remember pension funds are pools of capital of workers’ money—
current and future.
• Use fee research to challenge Wall Street’s control of the
resources of our cities and communities
• If we achieve cost savings, that money can be reinvested in local
communities
• For example, what would $1 million in fee savings provide:
• At 6% annual return
• A $50,000 annual pension
• With a 3% annual COLA
• For 30 years!