New Jersey Pension Investment Chairman Defends Fees in Testimony to Lawmakers

Last week, Pension360 covered the hearings held by New Jersey lawmakers examining the performance of the state pension system’s alternatives portfolio, and the  investment fees paid to third-party investment managers.

As part of the hearing, State Investment Council Chairman Tom Byrne testified in front of lawmakers and defended the level of fees paid by the pension fund.

At the same time, a union representative offered a counter-point to Byrne’s testimony and argued that the fees were excessive.

From ai-cio.com:

Questioned by lawmakers, State Investment Council Chairman Tom Byrne repeatedly pressed the message of value. The lion’s share of $600 million spent on external managers last year compensated alternatives managers for strong performance, he pointed out.

“The more we make in profits, the higher our incentive fees are going to be,” said Byrne, member of the state Democratic establishment and head of an asset management firm. “Would you pay $334 to make an additional $1,800?”

[…]

The union representative on the state pension board, Adam Liebtag, [took an opposite view].

“The staff at the Division of Investment managed 74% of the pension fund at 1/60th the cost of fees paid to outside hedge funds and alternative investment managers, so we have to wonder, are the large hedge fund fees really justified by the returns?” Liebtag asked. “The only people getting rich off the New Jersey pension system are hedge fund managers.”

The pension fund has already struggled to attract and retain talent for its in-house investment positions due to low and tightly controlled compensation packages, even relative to other US public funds. The people with sufficient “specialized training aren’t going to work for 100 grand,” Byrne pointed out.

A top investment position for the fund’s $36 billion equities portfolio is currently open, for example. The salary will be in the region of $100,000, with no opportunity for performance-based bonuses.

The New Jersey Department of the Treasury released an extended statement on the matter, which can be read here.

Photo credit: “New Jersey State House” by Marion Touvel – http://en.wikipedia.org/wiki/Image:New_Jersey_State_House.jpg. Licensed under Public domain via Wikimedia Commons