Public Pension Management and Asset Investment Review Commission Continues Hearings in Harrisburg

Expert testimony provides preliminary results of analysis of PA funds, including estimate of $3.8 billion in unreported fees


Harrisburg, PA – State Representative Mike Tobash, Chair, and Pennsylvania Treasurer Joe Torsella, Vice-Chair, of the Public Pension Management and Asset Investment Review Commission (PPMAIRC) today convened the second informational hearing in Harrisburg to examine the need for improvements in transparency around investment expenses and returns of Pennsylvania’s two statewide pension systems. Today’s hearing focused on an analysis of the pension plans across a variety of areas including asset allocation, fees and costs, performance and processes.


In response to the findings from today’s testimony, Treasurer Torsella issued the following statement:


“Today, we heard some troubling findings from experts in the public pension field, including Drs. Ashby Monk and Ludovic Phalippou. Among these findings, we heard for the first time today an estimate that billions of dollars have been paid to Wall Street money managers, but have not been disclosed to the Pennsylvania beneficiaries that rely on our pension system to make ends meet.

The work of this commission is essential to ensuring a strong system for our teachers and nurses, and everyone else who has spent their labor in service to the Commonwealth. Together with my colleagues at the commission, we will keep fighting to fulfill our statutory mandate to produce a roadmap for transparency and fee savings that puts our funds on a more sustainable path. I hope we can collaborate with our pension funds to continue this work, so that all our beneficiaries can receive the benefits they have earned after a lifetime of hard work.”


Pennsylvania Treasurer, Joe Torsella

“Openness and transparency are the key ingredients to develop the best public policies to improve people’s lives. Nothing else will be tolerated. We must bring down the debt in both of the Commonwealth’s major pension systems, thereby protecting an employee’s investment. The goal is to provide equal treatment to everyone – teachers, lawmakers, retirees, all state and school employees – so no one is favored or excluded.”


State Representative Mike Tobash

The Commission heard testimony from Dr. Ludovic Phalippou, Assistant Professor of Finance, University of Oxford. Dr. Phalippou conducted an internal analysis of the fees and performance of the private equity funds held by SERS and PERS. His preliminary results conclude that over the life of the two pension systems more than $12 billion has been spent on fees, much of which has gone unreported to Pennsylvanians. The pension systems have reported $2.2 billion in fees over the past 10 years, but Dr. Phalippou estimates $6 billion was actually spent with $3.8 billion in unreported fees.


The commission also heard from Dr. Ashby Monk who reported preliminary findings of his analysis of the two systems’ asset allocations, performance, and fees and costs.


The Commission was established in 2017 under the broader pension reforms of Act 5 of 2017 to conduct a comprehensive review of PSERS and SERS investment management. As part of its evaluation, the Commission will:


  • Recommend improvements to SERS and PSERS stress testing and fee reporting transparency;
  • Analyze SERS and PSERS assets, investment strategies, investment performance, fees, costs, and procedures against established benchmarks; and
  • Develop a plan to identify $1.5 billion in cost savings over 30 years for each of the two systems.

The Commission has six months to complete its review of PSERS and SERS, and to report findings and recommendations to the Governor and the General Assembly.


Today, Commission members also heard from experts from Standard & Poor and Dow Jones indices on the evaluation of active management versus indexing. In addition, two panels were held during the second part of the hearing focusing on peer approaches to investment strategies in South Dakota and Idaho and consolidated state investment boards in Wisconsin and Florida. The testimony concluded with an evaluation of alternative investment strategies from the Center for Retirement Research at Boston College.


The next hearing will take place in October, which will identify cost savings opportunities for the pension funds.

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