Calif. Pension System Promotes P-Share Class

The Orange County Employees Retirement System (OCERS) investment committee unanimously adopted a resolution supporting widespread industry use of pension share classes (P-share classes).

The resolution follows the form of a suggested model published by the Government Finance Officers Association of the U.S. and Canada in its February 2014 issue of Government Finance Review, written by OCERS’ chief investment officer (CIO) Girard Miller. One of the newer fee strategies included in the OCERS fee policy advocates more widespread use of pension-fund share classes in funds that offer alternative investments.

The article explains that a P-share class is a special pricing structure established within an investment fund that gives pension funds access to lower fees than mainstream investors get. The rationale for this includes the “sticky” and patient nature of public pension capital, as well as the growing importance of public pension commitments to the profitability and stability of investment advisory firms. Public pension funds, with their longer-term perspective and willingness to ride out short-term market turbulence, have become an attractive client base that deserves preferential pricing, the article says.

According to Miller, most commingled funds, hedge funds, private equity funds, and other fund structures can construct a P-share class that would reward the entire class of public pension fund investors with lower fees, if the fund receives aggregate investments that are large enough to create beneficial economies of scale. The share class can also reward the larger public pension funds that invest larger blocks of capital in the P-share-class with yet-lower graduated fees.

OCERS encourages more prevalent use of this pricing structure as the simplest and fairest way for public pension funds to realize meaningful economies of scale and pricing concessions that are appropriate to their patient, long-term investment horizon.

More information about the Government Finance Review is here. OCERS recently adopted a comprehensive fee policy that appears on its web page at, where Miller’s recent article is also available for readers.

The article presents a sample resolution endorsing the P-share-class concept, which can be modified for presentation to local pension plan governing bodies.