Home > News > Asset Management Culture > Kentucky County Employees’ Retirement System Proposes to Split Board’s Administration

Asset Management CultureFebruary 26, 2020

Kentucky County Employees’ Retirement System Proposes to Split Board’s Administration

Citing under-representation in the current KRS board, the system puts forth legislation to establish its own panel.

By Steffan Navedo-Perez

Kentucky’s County Employees’ Retirement System (CERS) is not satisfied with the representation it has on the Kentucky Retirement Systems’ (KRS) board, and has put forth new legislation that would establish a separate board for the system.

Local online newspaper Kentucky Today reported that a 215-page bill has been drafted to propose CERS receive its own independent board and that the two CERS and Kentucky Employees Retirement System (KERS) boards would report to a newly formed “Kentucky Public Pension Authority” that would provide administrative and personnel needs necessitated by the two boards.

“By creating an independent board, the Kentucky League of Cities and other agencies that support separation believe decisions can be made that are in the best interest of CERS, instead of the struggling Kentucky Employees Retirement System,” the Kentucky League of Cities wrote on its website.

“This bill would create a new CERS Board of Trustees that is free of political influence regardless of future administrations while also protecting the state’s pension systems and limiting duplication of services,” Bryanna Carroll from the Kentucky League of Cities told the KRS Administrative Subcommittee on Monday.

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According to Kentucky Today, Carroll stated that CERS has 76% of the assets and makes up 64% of the KRS membership, however it only has 35% of the seats on the KRS board, 14% on the actuarial subcommittee, and 11% on the investment committee.

KERS is approximately 13% funded and is regarded as one of the lowest-funded state pension plans in the United States. Spectrum News 1 reported last October that CERS claims to be approximately 60% funded.

The concept of creating an independent board has been in progress for some time, and last year, the Kentucky League of Cities reported that the group has until March 13, 2020, to come up with a proposal.

Recently, some state legislators pushed a bill that would see their pensions, which are currently governed by the Legislators Retirement Plan that is 99% funded, switch to the KRS in order to “align their interests” with that of their constituents under the ailing pension system.

Kentucky Gov. Andy Beshear’s two-year budget proposal would reduce the amount of contributions pegged to KRS.

“Under Gov. Beshear’s plan, $110 million more for the [agencies] is going to the Kentucky Employees Retirement System in each of the next two years compared to the last budget,” said Crystal Staley, a spokeswoman for Beshear. “The governor’s plan will result in an 84.41% employer contribution rate, which is about $25 million shy of the 93.01% rate, but is much greater than the 49.47% being contributed now.”

Kentucky Governor’s Budget Plan Would Cut State Pension Contributions

Kentucky Analysis Dispels Myth of 401ks as Pension Saviors

Tags: board, County Employees’ Retirement System, Governance, Kentucky, Kentucky Retirement Systems, law, Legislation, Pension Funds, Retirement System

Home > News > Asset Management Culture > Swiss Asset Manager GAM to Double Savings in Two Years

Asset Management Culture February 26, 2020

Swiss Asset Manager GAM to Double Savings in Two Years

After dismal 2019, the firm’s board will not receive a bonus, and the CEO will forego a $256,000 cash award.

By Michael Katz

Swiss asset manager GAM Holding said it will double its cost-cutting efforts over the next two years in a move to become more efficient and transparent—and to achieve operating margins of 30% in the wake of a dismal fiscal 2019. It also said its board and CEO would forgo bonuses.

The move comes as GAM reported that underlying profits before taxes plummeted 92% to CHF10.5 million in 2019 from CHF126.7 million in 2018, which it said was driven by lower net fee and commission income.

Net fee and commission income tumbled 34% to CHF329.9 million from CHF499.9 million in 2018. The company attributed the decline to lower net management fees and commissions as a result of lower average assets under management (AUM) and lower management fee margins in investment management and private labeling.

Despite 78% and 74% of investment management assets under management outperforming their benchmark over five years and three years, respectively, the firm’s investment management assets under management fell to CHF48.4 billion from CHF56.1 billion in 2018.

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In response to the poor performance, CEO Peter Sanderson, who was appointed to lead the company in September, announced cost-cutting measures that will add another CHF40 million ($40.8 million) in savings to bring the total amount saved to more than CHF80 million by 2022. Sanderson said his strategy for the company is based on three pillars: efficiency, transparency, and growth with clear financial targets.

As part of the cost-cutting measures, Sanderson also said the company’s group management board members will receive not receive bonuses for 2019 and that he will forego a contractual fixed cash award of CHF250,000 ($256,000) due to him this year. Additionally, the company’s board of directors will not propose a dividend for fiscal year 2019.

“The strategy we are outlining today will build long-term shareholder value,” Sanderson said in statement. “We will become more transparent and have set clear targets against which we will be measured. There are clear avenues to growth by building on our core strengths in client service and differentiated products.”

In addition to the CHF80 million in savings as part of the efficiency pillar, Sanderson said the transparency pillar will consist of increasing clarity, including recognition of the benefits that the company’s private labeling business creates for shareholders. As of end of September, GAM’s private labeling unit had more than CHF84.3 billion of third-party fund assets under management.

And, as part of the growth pillar, Sanderson said the company will build on its core strengths to attract and retain talent, incentivized over the long term, to grow the business and drive sustainable asset under management inflows.