News

Cost Savings

December 14, 2021

A critical policy objective of FPIF is to reduce the cost of investing Article 4 assets.  FPIF now has the data to show that those goals are being met.

In the October tranche, FPIF received $874 million in mutual fund assets and the fees on those assets ranged from 2 basis points to 160 basis points.  Approximately 78% of fees paid were to mutual funds with expense ratios of 50 basis points or greater.  The weighted average mutual fund fee was 37 basis points, which equates to over $3.2 million in mutual fund fees paid annually.  If these pension funds were paying FPIF’s fee of 3.3 basis points, that $3.2 million would fall to $288,000, which represents a savings of 91%.

In November FPIF received an additional $304 million in mutual fund assets.  The fees on those assets ranged from 3 basis points to 207 basis points.  Over 92% of those fees were paid to mutual funds with expense ratios of 50 basis points or greater.  The weighted average mutual fund fee was 52 basis points, which equates to $1.6 million in mutual fund fees paid annually.  If these pension funds were paying FPIF’s fee of 3.3 basis points, that $1.6 million would fall to approximately $100,000, which represents a savings of 94%.

When mutual funds received in October and November are evaluated in aggregate, the weighted average fee is 41 basis points, or $4.8 million.  If the 41 basis point fee is applied across all Article 4 funds as a proxy for what’s currently being paid by all Article 4 funds, the local firefighter pension funds are currently paying $30,500,000 dollars per year, which will be reduced to less than $2.5 million, for a savings of 92%, or approximately $28 million annually.  Of course, that savings excludes additional potential savings that come from having only one investment consultant, one custodian, and other costs eliminated that will no longer need to be incurred.