Institution: Employees Retirement System of Texas (ERS)
CIO: Tom Tull
Size: $25 billion (€22 billion)
Location: Austin, USA
In May we met with another straight talker as Vietnam veteran turned pension fund chief Tom Tull, told us how he played hard ball on the tricky business of fee negotiation.
Investing on behalf of the state employees of Texas, he managed to make savings of over $63 million (€60 million) across the fund’s private equity, hedge fund and private real estate exposure.
Tull revealed his strategy was most successful with mid-sized asset gatherers, who were more willing to negotiate not just on management fees, but also on the carry with a hurdle rate.
‘The usual fees in hedge funds are “two and 20”: 2% management fee, 20% carry. But I can’t think of the last two and 20 we did. We tend to be nearer to 1.1-1.5 depending on the asset class.’
Small asset managers were also on his radar as they helped to enhance the fund’s overall risk-adjusted return, at reasonable costs.
‘Many emerging managers outperform their larger peers because they look at things differently. Lots of them are thought leaders; they have market niches that they get more actively involved in.’
Among the firms the pension scheme has invested in are hedge fund Stone Lion Capital Partners, private equity company GCM Grosvenor and private real estate firm Oak Street Real Estate Capital.
Read the full story here.