CalPERS Wants More Fee Cuts

Apr 28 2010 | 7:45am ET

Fresh from winning fee concessions from private equity firm Apollo Global Management, the nation’s largest public pension fund is hungry for more fee breaks.

The California Public Employees’ Retirement System hopes to win similar fee deals with all of the private equity firms it has “significant” relationships with, chief investment officer Joseph Dear said Monday.

Joseph DearJoseph Dear“It just drives me nuts when I think about managers who are generating profits off the management fees,” Dear said at the Milken Institute Global Conference in Beverly Hills, Calif. “That’s why this drive to get better terms is so fundamentally important.”

Last week, Apollo agreed to cut the fees it charges CalPERS by $125 million over the next five years. But the fee breaks will not come from p.e. funds the pension invests in, but from $2 billion in separately-managed fixed-income accounts that Apollo manages exclusively for CalPERS. And the pension, which has $213 billion in assets, isn’t stopping at p.e. firms.

“We’re looking at private equity and hedge funds and some real estate for better terms and conditions,” Dear said.

Dear argued that, with p.e. firms struggling to raise money for new funds, time is of the essence in winning a new fee regime.

“There’s never been a better time to press their case and if we don’t take advantage it’s a missed opportunity,” he said.


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