The city of Altoona is planning to open management of its pension funds to competitive bidding, following at least two decades of management by the same firm.

“Going through an open selection process is necessary to ensure we’re getting the best investment guidance at a reasonable cost,” stated a city news release.

“Twenty years is too long without going to market” — especially as financial service work has become more competitive in the interim, said City Manager Ken Decker in a phone interview.

Subjecting the investment management task to a request for proposals is not an indictment of incumbent Wells Fargo but is “simply a matter of due diligence,” according to the news release.

Wells Fargo is welcome to bid on the job and even to maintain the same charges — though if it makes a proposal, it might behoove the firm to “sharpen their pencil,” Decker said.

“There’s nothing like competitive market forces to have everyone bring their ‘A’ game,” he said. “The only way to make sure we’re not overpaying is to make everybody bid — to make them compete.”

The RFP should give city officials an opportunity “to sit across the table” with candidates, thus helping to determine who’s best qualified, said Decker, who is responsible for the RFP initiative.

Citing the complexity of investment management contracts, Decker said he wasn’t sure what Wells Fargo is charging.

One element of those charges is the “basis point,” equivalent to a hundredth of 1 percent of the funds involved.

Management rates vary depending on fund amounts, the variety of investment types and whether adjustments are governed by index formulas or managed actively, Decker said.

Generally, management rates go down in inverse ratio to the amount of money managed, due to economies of scale, he said.

Rates are also cheaper for indexed funds, he said.

The firefighter, police and non-uniformed worker pension funds have a total balance of $95 million — with an estimated actuarial liability of $123 million, according to the news release.

That means the pensions are funded at 77 percent.

The liability is probably higher in reality, because the assumed 7.25 percent rate of return on investment is likely too optimistic, when considering potential earnings over the next decade or two, Decker said.

The RFP is written, but needs to be reviewed by an attorney, Decker said.

The proposals that result from the RFP will be reviewed by two members from each of the three pension boards, plus Decker, with recommendations for adoption to follow.

Mirror Staff Writer William Kibler is at 949-7038.