New York City Pensions Pulled $4.9 Billion From Pimco in 2014


New York City’s pension funds have pulled $4.9 billion from Pimco since Bill Gross left the firm in September.

A City spokesman confirmed that the pullout was due to “organizational change” within the firm.

From Reuters:

“The New York City Pension Funds recently transitioned out of $4.9 billion in Pimco accounts due to concerns over recent organizational changes,” Eric Sumberg, a spokesman for New York City Comptroller Scott Stringer, said in a statement.

Gross shocked bond markets in September by leaving Pimco, which he co-founded, for smaller rival Janus Capital, where he now manages the Janus Global Unconstrained Bond Fund (JUCAX.O).

The assets pulled from Pimco by the city pension funds were distributed to the city’s existing asset managers, Sumberg said.

Existing managers include BlackRock (BLK.N), Goldman Sachs (GS.N) and State Street (STT.N), among others.

According to Morningstar, the Pimco Total Return Fund, formerly managed by Gross, had record outflows of $103 billion in 2014. Investors pulled $150 billion from Pimco’s U.S. open-end mutual funds for 2014, Morningstar data also showed.

The New York pension funds still hold $2.4 billion in Treasury inflation-protected securities (TIPS) accounts with Pimco.

“At this time the Systems are in the midst of a search for TIPS mangers,” Sumberg said in the statement.

As noted above, New York’s pension funds haven’t exited Pimco entirely; they still have $2.4 billion invested with the firm.

The City’s pension funds collectively manage $158.7 billion in assets.


Photo by Tim (Timothy) Pearce via Flickr CC License

Video: New York City Comptroller Talks About Push By Pension Funds For More Control of Corporate Boardrooms and City’s Hedge Fund Allocation

Here’s an interview with New York City Comptroller Scott Stringer. Stringer is trustee of the City’s five pension funds.

During the course of the interview, Stringer talks about his push for pension funds to have more control over corporate boardrooms. He also defends the city pension system’s hedge fund allocations.

Pension Funds Push Back Against Bank of America Governance Changes

Bank of America

Three of the country’s largest public pension funds are pushing back against Bank of America’s recent decision to appoint Brian Moynihan as CEO and chairman.

A shareholder resolution had previously mandated that the positions be separate.

Now, pension funds are telling Bank of America it has poked its “finger in the eye of investors.”

From the Wall Street Journal:

Three of the largest pension systems in the U.S. are pushing back on the bank’s move, announced earlier this month. The resistance from the California Public Employees’ Retirement System, the California State Teachers’ Retirement System and the adviser to New York City’s five pension funds may result in a variety of steps to try to improve governance, including a shareholder campaign to challenge the move in the spring, according to people familiar with the matter.

Bank of America set off these investors’ ire when its board changed the bank’s bylaws Oct. 1 to allow it to combine the chairman and CEO roles, then announced later that day that it had given the chairman’s job to Mr. Moynihan. The move essentially unraveled a binding 2009 shareholder resolution to separate the positions. A majority of shareholders, including the three pension systems, had voted for that change at the bank.

“They have flaunted the will of the shareholders,” said Anne Sheehan, corporate-governance director at the California State Teachers’ Retirement System, or Calstrs, the second-largest pension fund in the U.S. by assets. “It’s like the board poking their finger in the eye of investors,” said Michael Garland, director of corporate governance to New York City Comptroller Scott Stringer, who advises the five New York City pension funds.

Collectively, the three pension systems control 93 million Bank of America shares, or about 0.9% of shares outstanding, according to the most recent data available.

Bank of America’s board is within its rights to combine the positions, because the board of virtually any company incorporated in Delaware is allowed to alter corporate bylaws, even if it means undoing a previous shareholder change.

Warren Buffett, another large shareholder, said he supported the move. From the WSJ:

Some big shareholders supported the move, including Warren Buffett , whose Berkshire Hathaway Inc. made a $5 billion investment in the bank in 2011.

“I support the Board’s decision 100%,” Mr. Buffett said in an email Wednesday in response to questions from The Wall Street Journal. “ Brian Moynihan has done a superb job as CEO of Bank of America and he will make an excellent Chairman as well.”

A CalSTRS spokesman told the Wall Street Journal that it is talking with other shareholders about next steps. The pension funds could use their sway to vote out certain board members; they could also file another shareholder resolution, similar to the one in 2009, which would prohibit the CEO and chairman positions from being occupied by one person.

Value of New York City Funds Reach All-Time High After Big Returns


New York City’s pension funds together returned over 17 percent for fiscal year 2013-14, the City’s strongest return since fiscal year 2010-11. As a result, the value of the City’s pension system has reached an all-time high. From Reuters:

New York City’s pension system had a banner fiscal year in 2014, increasing its total value to a record $160.5 billion, Comptroller Scott Stringer is set to announce on Monday.

That is a nearly $19 billion increase from the fiscal year ending July 31, 2013, when the five pension funds had a combined value of $141.7 billion, according to records on Stringer’s website.

As a result of the funds’ performance, the city will save $17.8 billion over the next two decades, due to an above-average rate of return, according to a press release distributed to reporters on Sunday.

“Five years of positive returns are good news for the pension funds and for the city,” Stringer said in the release.

The five combined funds had a 17.4 percent rate of return on investments for FY2014, which ended on June 30. That tops the rates of 12.1 percent in FY2013 and 1.4 percent in FY2012, but falls short of the 23.2 percent rate in FY11. The rate in FY2010 was 14.2 percent.

The assumed rate of return, which is set by the city’s actuary, is 7 percent. That means that if the funds perform below that rate, the city must make up the difference with taxpayer money.

The $17.8 billion in savings will begin in FY2016 and will be phased in over a six-year period. Each year’s incremental savings will be repeated for 15 years thereafter.

New York City is now planning on decreasing its contributions into the System, as the required payments are tied to investment returns; the bigger the returns, the less money the state is legally required to pay into the system.

Over fiscal year 2013, the S&P 500 returned nearly 22 percent.

Pension360 had previously covered the lackluster private equity returns from New York City pension funds.

The New York City Employees’ Retirement System (NYCERS) was 65 percent funded as of 2013, while the New York State and Local Retirement System was 87 percent funded.


Photo: Manhattan amk by user AngMoKio. Licensed under Creative Commons 

New York City Funds Lag Behind on Private Equity Performance


The private equity analytics firm Bison just came out with a list ranking the private equity performance of 50 public pension funds. New York City’s pension funds have been particularly active in PE funds, and are looking to invest even more in the area in coming years. So, how did the city fare?

You have to pay to see the full rankings, but the New York Post kindly outlined the results. And the news wasn’t good for New York City’s four largest pension funds. From the NY Post:

The worst performers — the New York City Employees’ Retirement System and the New York City Teachers’ Retirement System — tied for 45th place. The police pension fund, in 42nd place, and the firefighters fund, 37th, didn’t fare much better when it came to picking private equity firms, according to the analysis by Bison, a Boston analytics firm focused on the private markets.

“They have scores that put them closer to the bottom of that list than to the top,” Bison research manager Michael Roth said. “Fund selection could be better.”

New York funds’ reliance on private equity is part of a broader strategy to produce big returns. Across the city’s five funds, about 11.5 percent of assets ($18 billion) were committed to private equity fund.

Still, the strategy isn’t working as well for New York as it is for others. From the New York Post:

New York City Comptroller Scott Stringer has tasked his new chief investment officer, Scott Evans, who started this week, with figuring out how to boost the pension funds’ private equity portfolio.

“While we are concerned about long-term return in private equity, we have reason to be encouraged by the relative returns of our private equity portfolio in recent years,” a spokesman for the comptroller’s office said.

For the Massachusetts state pension, which ranks 6th, every $100 invested in private equity 10 years ago generated a 17.7 percent annual return and is now worth $512. The same investment in the five NYC pensions, which combined generated a 12.4 percent return, is worth $322.

Industry sources blame the city’s byzantine system under former New York City Comptroller Bill Thompson, who oversaw many of the pensions’ private equity investments from 2002 to 2009.

“The city was a hard place for private equity firms to navigate,” a placement agent said, adding that firms with the best records didn’t bother dealing with the city.

As of 2012, NYCERS was only 66 percent funded. The teacher’s fund was only 58 percent funded, the police fund was 64 percent funded, and the firefighters fund was a mere 52 percent funded.


Photo by Chris Chan via Flickr CC