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.