An outside review of the New York Common Retirement Fund – the second such review in 2016 – found the $178 billion fund is being managed well but is understaffed.
The review also suggested it pay its existing staff higher wages, and continue trying to cut investment costs associated with external managers.
The pension fund is being reviewed periodically after a pay-to-play scandal years ago.
In the latest review, released Thursday, Funston examined 96 investment transactions approved by the comptroller from April 1, 2012, through March 31, 2015, concluding that they all followed policies and legal requirements.
“We did not identify any instances of inappropriate or unethical behavior,” the report said.
Funston said most of its recommendations from three years ago, such as better documentation and computer support, were implemented. But the fund remains “severely understaffed for its scale and complexity, with underdeveloped risk analysis and management capabilities and an over-reliance on outsourced investment management and support functions.”
The reviewers noted the pay levels were in the bottom quarter among similar public pension funds, raising concern about staff turnover and recruiting. They again recommended adding staff and raising pay, anticipating lower overall costs by keeping more work in-house.
The fund, with 37 investment staff and 21 other employees, paid $561 million in outside management fees last year. That was up from $552 million a year earlier and $454 million in 2013.
“The reality is, in this environment, the fund doesn’t generate much of a return where the markets have been up and down and basically flat lately. The alternatives are where we’ve gotten the extra returns. So while there are more fees there, there’s been a benefit in terms of returns,” DiNapoli said. “We agree with the need to reduce fees. By having more staff, you could do more of this in-house.”