Cost of Management
By reducing costs through its asset allocation, managing more funds internally and passively, and negotiating lower fees for external managers it hires, SWIB generates millions of dollars in savings compared to its peers.
Having a strong internal management program provides a significant financial benefit to the WRS. SWIB’s Board of Trustees has committed to internal active management. Internally managing about 50% of WRS assets helps SWIB’s total cost of management compare favorably to other U.S. public pension funds, according to CEM Benchmarking, an independent provider of objective cost benchmarking for public pension plans.
CEM’s most recent report found that for calendar year 2020 (the most recent data available), SWIB’s cost of management was 9.3 basis points or $103 million lower than U.S. public pension fund average and $15 million lower than the CEM benchmark, which is adjusted for investing style. (One basis point is equal to 0.01%, 1/100th of a percent, or 1 cent for each $100.) CEM also found that SWIB’s cost for internal active management remains considerably lower than the cost for external active management. From 2011-2020, SWIB has saved $1.1 billion when compared to peer pension plans.