Investment Plan 2011 - OPERS

Ohio Public Employees Retirement System
2011 Annual Investment Plan
Management Cost
The expected annual external management fees by asset class for the Investment Division
are in the table below. The estimate of fees is based on the 2011 projected average
market value for the Defined Benefit and Health Care Funds, as shown by sub-asset class
in the average assets column below.
Estimate of External and Internal Management Costs
Total for 2011
External Management Internal Management
Average Annual Annual Average Annual Annual
Assets Cost Cost Assets Cost Cost
($ millions) ($ millions) (bps) ($ millions) ($ millions) (bps)
Public Equity 24,408 79.1 32.4 16,473 6.8 4.1
U.S. Equity 4,881 29.3 60.0 15,973 6.0 4.4
Non-U.S. Equity 19,528 49.8 25.5 500 0.8 2.1
Public Fixed Income 3,991 15.7 39.4 15,343 4.8 3.1
Core Fixed 100 0.4 35.0 11,634 4.2 3.6
Long Bonds 0 NA NA 1,824 0.3 1.4
TIPS 0 NA NA 425 0.1 2.1
High Yield 3,284 12.6 38.5 0 NA NA
Emerging Mkt Debt 607 2.7 45.0 0 NA NA
Liquidity 0 NA NA 1,459 0.2 1.4
Alternatives 11,000 196.8 178.9 1,745 1.0 5.7
Private Equity 3,947 95.1 241.0 NA NA NA
Real Estate 5,711 74.8 131.0 NA NA NA
REIT 0 NA NA 729 0.7 10.2
Hedge Funds 1,343 26.9 200.0 NA NA NA
Opportunistic NA NA NA 895 0.1 1.4
Commodities NA NA NA 121 0.1 10.0
Total 39,399 291.6 74.0 33,562 12.6 3.7
Custody and Overhead 1.4 2.9
Internal Cost Allocation 6.0 NA
Total Fund 39,399 298.1 75.7 33,562 15.5 4.6
There is a significant cost advantage of internal management versus external management.
Within U.S. Equity, the proportion of passive assets contributes to the lower internal
management costs, reducing them by more than half over what they would be for active
assets. Another source of cost savings is that it is less costly to manage assets internally
(i.e. lower salaries and incentives, lower rent, less travel, no marketing costs, no standalone
business expenses and no profit margin).
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