CERS investment committee recommends XTP to full board for fee-validation contract

The County Employees Retirement System Board of Trustees Investment Committee voted to recommend XTP to the full CERS board for a contract to independently validate investment fees and review manager compliance, the committee decided after hearing two finalist presentations and a period of questioning.

Committee Chair Dr. Hackbarth convened the special meeting and framed the agenda: the committee had circulated an RFP seeking validation of previously paid fees and expenses across KPPA-managed public and private portfolios. Steve, a KPPA investment staff member, told the committee the RFP closed Aug. 11 with six responses and that the finalist pool was narrowed to firms invited to present.

At the presentations, an XTP representative described the firm's holistic ‘‘total cost of ownership' approach. The presenter said XTP measures trading costs, custody fees and other below-the-line charges as well as top-line management fees, typically performs a 12-month lookback for public markets and a since-inception review for private-market mandates, and is paid only when measurable savings are realized: “We're only compensated when we're able to move the needle,” the XTP representative said. He told the committee XTP has measured “over 10,000 portfolios” and that typical public-market savings generally fall in the 3'5 basis-point range, while private-market work more often yields clawbacks.

Alborn representatives, including Arabella Wuchek and Steve Taylor, outlined a fee-validation service focused on alternative investments and private markets, emphasizing an independent recalculation of fees, a two-person data-review process, a fee-controller portal and transparent, per-line-item pricing. Wuchek said Alborn's work has identified fee errors ‘‘in the tens of millions' for clients and that most pension clients run validation on an annual schedule.

Committee members probed both firms on practical implementation: how many mandates would be reviewed, what lookback periods would apply, staff time required, how verified savings would be calculated and invoiced, and how clawbacks or forward savings would be accounted for. The XTP representative said the firm would share calculations for any realized savings with KPPA before invoicing and would invoice only after those savings were reflected in plan accounts; he described a 24-month monitoring window for forward savings when negotiated. Alborn representatives said the per-line fee schedule depends on scope and that legal-document diligence or broader operational-due-diligence support could be added when needed.

After discussion on trade-offs — Alborn's known per-line cost and focus on fee recalculation versus XTP's broader, results-driven approach with no payment unless savings are realized — a committee member moved that staff pursue developing a recommendation to the full CERS board; the motion passed. A later motion to recommend XTP for contract development to the full board was seconded and carried by voice vote. The committee asked staff to obtain written clarifications on contract terms (verification methodology, timing of payments, scope, and any shared-savings calculations) before the full-board meeting.

Votes at a glance: the Investment Committee approved a motion to develop a recommendation to the full CERS board to negotiate a contract with XTP; the motion carried by voice vote with no recorded roll-call tally in the transcript.

Next steps: Staff will collect written responses and contract clarifications from XTP and will present a formal recommendation and draft contract terms to the full CERS board for final approval.