(January 10, 2013) — The State of Wisconsin Investment Board (SWIB) is getting its fair share of praise, and with some public pension plans in the United States facing large funding shortfalls, that’s no small feat.
According to the Cost Effectiveness Measurement (CEM) Benchmarking, SWIB’s management costs are lower than those of its peers. This comes largely due to the fact that it relies more heavily on internal management of its assets as opposed to giving the responsibility to external managers, which would mean a higher level of fees. “Since 2007, our investment team has worked to put in place a strong internal management program,” Michael Williamson, SWIB executive director said in a statement.“The program has allowed SWIB to manage the [Wisconsin Retirement System] WRS more efficiently by paying less for out-of-state external manager fees and creating investment jobs here in Wisconsin. In addition, SWIB has implemented a number of investment strategies that provide favorable returns and acceptable risk to keep the WRS fully-funded and able to meet the annuities promised to retirees.”
At the same time, San Francisco-based Callan Associates noted that SWIB topped its peer group for the five-year period ending September 30 in terms of the returns earned based on the amount of risk of the investments.
Late last year, SWIB’s Chief Investment Officer David Villa–ranked 18th on aiCIO‘s Power 100 list of the world’s most influential asset owners–called Wisconsin’s scheme a model for other American public plans. “We have a staff-driven investment structure with more than half of our investments in-house, an independent board, and we’ve been on the forefront of innovation,” he asserted. SWIB’s governance model allows the plan to investigate more niche strategies such as risk parity—in which it invests significantly, he added.
In June, the Pew Center on the States showed that SWIB was fully funded in fiscal year 2010.