LACERS Scores Well Compared to Peer Funds


Michael Wilkinson, LACERS/Legal Representative

By Michael R. Wilkinson, LACERS Commissioner

Former Mayor of New York Ed Koch was always asking the public, “How am I doing?” Well, LACERS asked the same thing when it asked an independent firm to do a benchmarking test to compare its performance to other comparable public pension plans.

CEM Benchmarking was hired to compare LACERS’ result to CEM’s global universe of more than 400 funds representing $15 trillion in assets, as well as a more targeted group of peer funds near to LACERS’ size.

LACERS’ five-year total return for the period ending Dec. 31, 2021, was 40 basis points better than the median U.S. public fund and also the peer median. 100 basis points equals one percentage point. The five-year return was 11.6 percent for LACERS and 11.2 percent for the peer median.

When we do use active management, we get a good return with 70 basis points of gain after deducting for the additional costs of active management. This is 10 basis points better than our peers and equal to the U.S. median fund. So, all in all, it costs less and delivers more.

CEM uses 145 pension funds in its comparison database. The median U.S. fund had assets of $13.2 billion, and the average fund had assets of $31.2 billion. However, CEM found the most informative comparison to LACERS was to the U.S. public universe of 46 funds, and more specifically to the 19 public funds sized from $10 billion to $46.9 billion.

And finally, investment costs. It doesn’t matter if you have good gross returns if your money is eaten up by high fees. LACERS had 1.8 basis points of savings on fees versus its peers by more use of passive management and less use of fund of funds for alternative investments.

For risk, LACERS had a slightly higher risk of 12.0 percent versus 11.1 percent for the fund median. It should be noted that this measure does not capture the return that relates to that risk, but rather the standard deviation or up and down swings of the asset class