NYC Pensions Paid Record Fees in 2014; Former Pension Official Says Comptroller “Dragging His Feet” On Cutting Expenses

Manhattan

New York City Comptroller Scott Stringer serves as investment advisor to the boards of the city’s five pension funds, which together manage $144 billion in assets.

Last year, Stringer’s office said the city’s pension systems needed to “limit costs” and “negotiate lower fees”.

One year later, the pension systems have paid a record number of investment fees – $530 million – and a former director of the city’s largest pension fund is accusing Stringer of “dragging his feet” on bringing expenses down.

The city’s pension system paid more fees in 2014 than it had in any previous year. From the New York Post:

The city paid a record $530.2 million in fees to pension investment firms last fiscal year, despite Comptroller Scott Stringer’s vow to rein in the escalating costs.

The fat fees forked out to private advisers and consultants skyrocketed from $472.5 million in fiscal year 2013. The half-billion dollars in fiscal year 2014 is five times the $97.9 million paid in 2003.

In the last 15 years, the city has paid $4 billion to advisers.

A year ago, Stringer reacted sternly to reports that his predecessor, John Liu, had paid investment firms 28 percent more than the year before.

“We need to limit costs, ensure payments are commensurate with performance and . . . negotiate lower fees,” a Stringer spokesman said at the time.

Last week, Stringer’s office said he “has made lowering fees a top priority,” but did not give any examples of lowered fees or firms fired for lackluster performance.

One former pension official questioned Stringer’s commitment to lowering investment fees. The official said that Stringer has voted for fees in the past, and hasn’t done anything to bring them down. From the NY Post:

John Murphy, former executive director of NYCERS, the city’s largest pension fund, said Stringer sat on the NYCERS board of trustees as Manhattan borough president.

“He voted for these fees for eight years. Now he’s dragging his feet on doing something about it as a comptroller,” Murphy said.

Besides putting money into stocks and bonds, the comptroller pays dozens of outside advisers to manage investments in riskier private-equity, real-estate and hedge funds.

Murphy called on Stringer to make public his contracts with investment managers, especially private-equity firms, which take payments from the funds they oversee.

“There’s no way to know how much money they’re making” for the pension funds or taking in compensation, Murphy said.

[Stringer spokesman Eric] Sumberg said, “We are reviewing ways to provide transparency on the general terms of our contracts.”

NYC’s five pension systems control $144 billion in assets. They assume a 7 percent return on investment annually.

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