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Iowa PERS hires Kalytix, begins process for internal investment management

  • Assets under management: $30.72 bln
  • PE allocation: $3.64 bln
  • PE investment advisor: Pathway Capital Management
  • Who to contact: Judy Akre (judy.akre@ipers.org)
  • Why this is important:Mid-sized LPs are looking to manage their investments internally

Iowa Public Employees’ Retirement System hired Kalytix Partners for consulting services to set up its internal investment management system, a press release said.

The pension system issued a request for proposal in April. The three finalists were C&A Consulting, Funston Advisory and Kalytix. IPERS awarded the contract to Kalytix for a flat fee of $110,000 for one year.

High external management fees and desire to actively control its assets for better alignment of interest led IPERS to explore setting up its internal management system, the proposal said.

IPERS’s global macro portfolio will be the first asset class to transition to internal management, followed by other strategies, including private equity.

Ashby Monk and Gordon Clark will lead the effort at Kalytix.

Kalytix will address governance changes, potential costs of additional systems, software or services, personnel costs for new positions and a suggested implementation plan for the new strategy, pension documents said.

Governance changes are required for better decision-making and less political interference, a source with knowledge of the pension system said.

Governance issues will define what kind of people IPERS will attract for the new positions and the compensation structure that can be designed for them, the source said.

The local investment talent pool at Iowa is robust because of the presence of large insurers, the source said.

Indeed, Principal Financial Group and Employers Mutual Co are headquartered in Des Moines. In addition, ING and Nationwide have strong presences in the state.

“IPERS is committed to the changes, so it will be interesting to see how this works,” the source said.

IPERS paid almost $59 million in fees and brokerage to external managers in 2017. Managers in international equity, domestic equity and private real asset were paid the highest at $11.7 million, $10 million and $11 million respectively. Private equity managers received $6.7 million in fees in 2017, its 2017 annual report said.

IPERS paid almost $52 million in fees in 2016.

In comparison, the pension system paid the investment staff and board members a total of $1.38 million in 2017 and $1.3 million in 2016, the report said.

In the past few years, several public pension systems, including California Public Employees’ Retirement System, California State Teachers’ Retirement System, State of Wisconsin Investment Board and New York State Common Retirement Fund, transitioned to internal management of their investments.

Action Item: Read more on public pension fund challenges here:  https://bit.ly/2C7zak8