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Delving Deeper Into New York Fund’s Partnership With Goldman Sachs

Manhattan, New York

New York State Comptroller Thomas P. DiNapoli announced yesterday that New York’s Common Retirement Fund (CRF) plans to give $2 billion to Goldman Sachs for investing in global stocks.

The partnership is the first of its kind of the CRF. Aaron Elstein, who runs the In The Markets blog, weighed in on the partnership in a column on Wednesday:

“This innovative partnership gives the New York State Common Retirement Fund full access to world-class global equity investment opportunities and the nimbleness to take advantage of them on a timely basis,” DiNapoli said.

The innovative thing is that the pension fund hasn’t hired Goldman before. As for “access to world-class global equity investment opportunities,” it seems worth noting that mutual funds bearing the Goldman Sachs name have collectively returned 12.43% over the past five years, according to Morningstar, which is average for their category. In 2010 and 2011 the funds underperformed their category and in 2012 and 2013 outperformed. This year, their total return of 4.7% is exactly in line with the category. Maybe the global equity investment opportunities from Goldman aren’t really the ones to which you’d want special access. (A spokesman for the comptroller’s office later said Goldman can’t pitch in-house funds to the pension fund.)

Certainly the New York state pension fund will be offered investments that Goldman doesn’t make available to mutual fund customers. We know that because the press release said the pension fund and Goldman “will initially focus on dynamic manager selection opportunities in global equities to enhance returns in the Fund’s equity portfolio.” That doesn’t sound like such a bargain, either.

“Dynamic manager selection opportunities” is gibberish that in its tortured way means Goldman will introduce the pension fund to money managers who aim to outperform the market.

Elstein goes on to dissect the rest of yesterday’s press release from DiNapoli and also touches on the drawbacks of actively managing investments. Read the whole column here.

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