Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Pa. Treasurer Sets New Standard for Fee Disclosures

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Pa. Treasurer Sets New Standard for Fee Disclosures

Article excerpt

The Pennsylvania Treasury has long reported just the "base" management fees on investments. In 2017 alone, that meant almost $21 million in fees paid to fund managers on state investments weren't publicly disclosed.

"Although this practice remains far too common in public investing, it's time to put an end to it at every fund that invests public money," state Treasurer Joe Torsella said in a prepared statement.

The funds involved are general state funds.

In 2017, the state Treasury disclosed $13.2 million in fees had been paid on management of about $650 million in assets. The $20.8 million in fees that went undisclosed represented "carried interest" and sub-manager fees that came from the profits generated by state assets.

Many public funds do not report carried interest fees because they are not paid directly by the investor. Instead, the charges are levied against the fund and reflected by a lower asset value.

The state Treasury's policy changes have been in the works for a while, but fee disclosure has been a topic of interest in Harrisburg of late.

Last week the state's Public Pension Management and Asset Investment Review Commission heard testimony that more than 100 private equity investment firms earned about $3.8 billion in undisclosed fees over the past 10 years managing investments for the state worker (SERS) and school employee (PSERS) pension funds.

As state treasurer, Mr. Torsella sits on the boards of PSERS and SERS, and serves as vice chair.

What was learned from expert testimony at the Public Pension Management and Asset Investment Review Commission hearing is that there is a need for transparency from both pension funds.

And although the new disclosure policy that Mr. Torsella has put in place will not stop fund managers from collecting staggering payments that are over and above the money management fees they earn, it will at least require that those fees be made clear to the public. …

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