UPDATE: Montco pension returns edges Philly's

Montgomery County's elected commissioners chairman, Josh Shapiro, is celebrating the county's first one-year investment returns since ditching its old-style private money managers and their fees and hiring low-fee Malvern-based Vanguard stock and bond index funds and Oaks-based SEI "alternative investment" managers to run the county pension fund.

Montco's returns for the year ended June 30, after paying fees: 16.23%. Vs. the fund's "portfolio specific market benchmark," which returned 15.9%. That's double the pension's "actuarial earning assumption" target of 7.5% a year, thanks mostly to the bull market in stocks. Though it's still below the recent surge in the U.S. stock market.

Philadelphia's city pension plan, by comparison, reported 15.6% during the same period, beating its own benchmark of 13.64%. Read Philly's results here. Unlike Montco, Philly resembles the larger Pennsylvania state workers (SERS), state teachers (PSERS) and New Jersey public pension plans in mixing stocks and bonds with a lot of hand-picked buyout, venture, real estate, energy, junk-bond or hedge-fund managers. The results, net of fees, weren't too different, this year.

Here's the breakdown between the 90% of Montco pension investments indexed by Vanguard and the 10% managed by SEI:
   Vanguard U.S. and foreign stocks and bonds: 16.4%; which passed the fund's benchmark target of 16.04%.
   SEI alternative investments: 16.23%; vs. benchmark 15.9%.

Montco reports a reduction in money management fees from 44 basis points (0.0044%, about $2.1 million) to a little under 18 basis points (0.0018%, approx. $880,000) since it dropped its list of private managers for Vanguard and SEI. Which Shapiro figures is like a savings of $1.2 million. Though if private managers made a lot more money for the pension funds, they could argue they are worth much higher fees, no? 

I'd compare this to the much more complex Philadelphia, Pennsylvania and New Jersey pension funds, with all their real estate, buyout, venture, junk debt and hedge fund billions. But they haven't reported their returns for the year yet. More later.