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Wolf administration cuts Wall Street money managers

Effort expected to save $5.6M per year

The commonwealth will cut out dozens of Wall Street investment managers for three state investment funds, a move expected to save Pennsylvania about $5.6 million per year, according to the Wolf administration.

Gov. Tom Wolf and Treasurer Timothy Reese today announced that the Department of Treasury will manage the State Workers’ Insurance Fund, the Workers’ Compensation Security Fund and the Underground Storage Tank Indemnification Fund.

The three funds have combined assets worth about $2.3 billion.

The move comes as the commonwealth faces a fiscal budget shortfall and long-term structural deficit.

The Wolf administration has made a series of changes in recent weeks to help control state spending, including state prison closures, eliminating thousands of unfilled state jobs, consolidating information technology and human resources services, and minimizing new and renewed leases by state agencies.

By fund, the savings include:

  • $3.1 million annually from the State Workers’ Insurance Fund, which is currently managed by 24 firms for $3.3 million annually. Treasury will manage the funds for about $145,000.
  • $2.4 million annually from the Workers’ Compensation Security Fund, which is managed by 12 firms for $2.9 million annually. Treasury will manage it for about $500,000.
  • $525,000 annually from the Underground Storage Tank Indemnification Fund, which is managed by nine firms for $600,000 annually. Treasury will manage the funds for about $75,000.

In recent years, Pennsylvania has been trying to limit investment fees paid to Wall Street firms. Much of the attention has been on the two largest public-sector pension funds, the Public School Employees’ Retirement System and the State Employees’ Retirement System.

For its 2015 fiscal year, PSERS reported investment management expenses of $455.2 million. That was down more than $102 million over two years.

SERS posted investment expenses of $159 million in 2015, down more than $16 million over two years. Since 2010, fees have dropped by more than $69 million at SERS.

To see the investment firms impacted by the change, click here.

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