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Indiana lowers fees amid growing co-investments

The $31.2bn pension plan, which has about 12% of its defined benefit assets in private markets, was able to lower management fees by 6% across asset classes.

The Indiana Public Retirement System anticipates it will have lower management fees than initially planned for its 2017 fiscal year ended 30 June thanks to a greater emphasis on co-investments.

The $31.2 billion pension plan, which has about 12 percent of its defined benefit assets in private markets, said it will spend about $177.8 million in management fees across all DB asset classes for fiscal year 2017, down from the $189.2 million initially budgeted for the year.

INPRS attributed the reduction to an increase in the use of co-investments in private markets, it wrote in documents prepared for its 23 June meeting. Co-investments often come with no fees or reduced fees.

Alternative investments at INPRS, which are comprised of private markets, real estate and absolute return, represent the vast majority, or nearly 68 percent, of all investment management fees, despite making up only 28 percent of INPRS market value.

Indianapolis-based INPRS paid $177.2 million in DB annual investment expenses in fiscal year 2016, and is budgeting $206.8 million for fiscal year 2018.

For fiscal year 2016, the private markets category returned 6.8 percent net of fees, making it the third best performing asset class for the year. The best performing asset class was fixed income, which delivered an 8.9 percent net return, followed by real estate, with an 8.1 percent net return for 2016.

Recent commitments to private equity include $75 million to Veritas Capital Fund VI and $50 million to Bregal Sagemount II.