Page 42 - Transforming To Stay Successful

F2017 F2020

19%
30%

52% 45%
29%

25%

External Indirect Internal External Indirect External
Direct
External Direct Internal

* Values reflect actual costs for F2017, and * Source: F2018 BCI budget.
are shown on a cost-recovery basis as a
percentage of total costs. Source: F2018
BCI budget.

As you see in the diagram above, our costs will shift towards the internal
side more, as we expand our team, renew and replace legacy technology,
and start moving to an operating model that’s aligned with in-house
management.

Meanwhile, costs will shift away from “External Indirect” as we cut back on
the use of external managers, and manage more in-house. “External Indirect”
accounted for more than half of our total costs, at 52 per cent, for F2017 —
and were incurred within our illiquid and fixed income programs through third
parties and fund investments. These external managers are 300 to 700 per
cent more expensive than internal managers, and transitioning to an in-house

42 COSTS MATTER