Pension Fund Takes Neighborly Advice

Michael Corkery and Kirsten Grind of the Wall Street Journal report:

When officials with Montgomery County, Pa., became troubled by their pension fund’s investment fees and recent performance, they turned to a neighbor for advice. His take: Park money in low-cost index funds.

And that is what they are doing, a move that highlights the growing frustration many pension officials feel toward expensive Wall Street investment managers. The county is now shifting nearly all its $470 million in pension assets to a handful of index funds run by Vanguard Group Inc.

The county, in the Philadelphia suburbs, says the move is expected to reduce investment fees by roughly two-thirds. It will be paying about 0.13% of its pension assets in investment fees by switching 90% of its assets to Vanguard’s funds. It had been paying about 0.43% in fees to its current crop of so-called active and passive managers.

Officials in Montgomery County, home to about 800,000 people, started pondering changes when a new crop of pension board members took office in early 2012, and consulted with a number of investment experts.

Read the entire article here.