PA Treasury Sets New Standard On Fee Transparency

Will now disclose previously unreported “carried interest” and other fees


Harrisburg, PA – Pennsylvania Treasurer Joe Torsella today announced a major step in Treasury’s transparency initiatives with a policy change mandating the disclosure of all fees paid by the department for the management of Commonwealth assets, whether paid directly or indirectly. This additional fee disclosure continues Treasurer Torsella’s work to identify and disclose the true fees paid for management of Commonwealth assets. The announcement is part of an ongoing effort to increase financial transparency in state government, highlighted by the creation of Treasury’s Transparency Portal, and a focus on reducing Wall Street fees to improve investment returns for taxpayers.


“As Treasurer, I don’t want to just report what I’m required to, I want to let the public know everything they are entitled to. That’s why I’m proud to make Pennsylvania a national leader in fee transparency, by changing the longstanding policy and practice at Treasury that only reported ‘base’ management fees, and did not disclose additional fees such as ‘carried interest.’ Although this practice remains far too common in public investing, it’s time to put an end to it at every fund that invests public money. On my watch, we will disclose all fees, because we can’t manage what we don’t measure. I’m working hard to further cut fees paid to Wall Street money managers, and we can’t do that without calculating where every last dollar goes. This money belongs to the people of Pennsylvania, and they have a right to know where it’s going.”


Pennsylvania Treasurer, Joe Torsella

In his announcement, Torsella said the additional fees totaled $20,798,895 for the 2017 calendar year, and the Treasury Department’s annual financial reports will henceforth reflect these fees. This amount represents carried interest and sub-manager fees for certain asset classes, fees the department did not previously calculate or disclose. The figure is in addition to the base management fees Treasury has historically calculated and disclosed. Many public funds do not report such fees, because they are not paid “directly” by the investor; instead, the charges are levied against the fund and reflected by a lower asset value. But a growing effort toward full fee transparency recognizes that these are real costs, and that obscuring this information makes it impossible to truly judge performance, or measure alignment of interests between investors and managers. With this move, Pennsylvania joins several states—such as California and South Carolina—that have recently begun disclosing “carried interest” and other hidden fees. The additional transparency of this reporting also makes Treasury the only statewide government investor to adhere to recommendations from the Government Finance Officers Association (GFOA).


Torsella has taken significant action to protect taxpayer money by eliminating high management fees paid to Wall Street firms by setting a new low-cost indexing investment strategy shortly after taking office. To reduce investment risk and improve returns to taxpayers, Torsella authorized the transition of more than $2.4 billion in public equity investment holdings to low-cost index strategies, and later expanded the program to include more than $2.9 billion in fixed income investment holdings. Combined, the indexing moves will save nearly $300 million per year in fees over a 20 year period. Torsella is currently reviewing the Department’s approach to so-called “alternative investments.”


Share on Social Media