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.
of assets are managed in-house by SWIB staff.
Over the past 10 years, SWIB has saved $410 million compared to similar funds
SWIB's greater reliance on internal management saves about $75 million per year compared to what similar funds would pay to manage the same assets externally.
Internal Asset Management Costs Less
SWIB is a low cost provider among its peers is because more assets have been transitioned to internal management. In 2007, SWIB managed 21% of assets in house. Today, SWIB uses its own staff to invest approximately 62% of those assets. SWIB can invest those assets for multiples less than what it would pay external managers to do the same work.
Because of a greater reliance on internal management, SWIB is saving $75 million per year compared to what other public pension fund peers would pay to manage the same assets. Over the past 10 years, SWIB has saved $410 million compared to similar funds in large part due to the use of internal investment staff.
SWIB's use of internal management, combined with cost optimization efforts, has earned $779 million above market returns over the past five years.
All Funds - Total Costs of Management
Although approximately 62% of assets were internally managed, it only represented 21% of the cost. Costs to manage 38% of assets externally represents 79% of SWIB's total costs. There are some areas that SWIB needs to use external management. In those cases, SWIB is negotiating lower fees than many of its peers.
Low Cost Pension Fund Manager
SWIB evaluates its cost efficiency using a third party firm to benchmark costs against a pool of similar large U.S. public pension funds. SWIB's costs have consistently remained below its peers and have been basically flat over the past five years.