OUTSMARTING PSERS
Last week the Pennsylvania State Employee’s Retirement system, a cousin of PSERS, replaced the Blackrock Alpha Tilt Fund with the Blackrock Equity Index Fund. The alpha fund tries to beat the return of the S&P 500 and the equity fund simply tries to imitate the S&P’s return. The alpha fund charges .28%/yr and the equity index fund charges .18%/yr. Why doesn’t SERS simply invest in a low cost ETF that mimics the S&P without the active management component and corresponding higher fee for .06%?
Let’s pretend it’s your own investment account: $200,000 invested for 20 years at 6% growth
Expense Charge % Annual Fee Amount 20 Year Cost
BlackRock Alpha Tilts Fund .28 $580 $20,600
BlackRock Equity Index Fund .18 $360 $13,243
Vanguard S&P 500 ETF (VOO) .06 $120 $4,414
The Average Individual Investor pays 1.30 $2600 $95,426
If you don’t know what you are paying for investment management fees, perhaps it’s time you ask!!!! Unless, it’s your priority to add to the Wall Street bonus pool!
