Wednesday, April 22, 2015

NC Pension Fund Fees Approach $500 Million

Andy Silton does the math and reports that fees for the pension fund are approaching $500 Million.

Just so we are clear here, that's $500,000,000.

So what are we getting for all these fees?   Apparently not a whole lot of extra performance - which is no surprise to anyone who believes that markets are pretty efficient (they are).

Silton points out that otherwise the fund is in good health - which is good, but that doesn't make wasting hundreds of millions of dollars a year any less bad.

The question we should ask then is "how much should these fees be?"

I'd answer that for such a huge portfolio, 0.1% of assets is a good start, as I can pay only 0.18% for $3000 with Vanguard and it seems reasonable to assume that $90 billion would get some sort of discount.

So assuming $90 billion in the fund, 0.1% fee would yield $90 million in fees.  But even if you go with the Vanguard fee of 0.18%, we're still only looking at $162 million.   That's $338 million less that what we are paying.