Review Finds Resource Shortfall, Understaffing In NYC Pension Investment Office

An independent report, commissioned by New York City Comptroller Scott Stringer, found that “operational failure is likely” in the investment office of New York City’s pension funds due to lack of resources and under-staffing, among other things.

[Read the report here.]

The assets of the city’s five pension funds are pooled and managed by the Bureau of Asset Management. That department was the subject of the independent review.

The findings of the report were presented to the trustees on Monday.

More from the New York Times:

The report found that the city’s retirement system, the fourth largest in the country, needs additional resources, is understaffed and lacks many basic tools required to gain insight into the complicated risk embedded in its investments. Some managers rely on fax machines to send and receive vital information.

In some cases, the system, known as the Bureau of Asset Management, does not even have the internal controls necessary to ensure individuals cannot circumvent compliance, the report concluded.

“Operational risk is very high and an operational failure is likely,” the 398-page report, by Funston Advisory Services of Michigan, said.

Funston did not find any specific examples of mismanagement that had resulted directly in a loss of money. Still, the consultant raised a number of troubling issues that could cost the retirement system money, like the inability to properly identify portfolio risk.

[…]

The report found that there were just two people monitoring the $10 billion that the system has invested in private equity. “It is not possible for two individuals to monitor nearly 200 partnerships from 115 managers in a manner so as to properly fulfill fiduciary responsibilities,” the report concluded.

The Bureau of Asset Management oversees $160 billion in assets for the city’s pension funds.

Photo by Thomas Hawk via Flickr CC License