New York City Names New Chief Pension Adviser

Manhattan

NYC Mayor Bill de Blasio on Monday appointed John Adler to the post of chief pension investment adviser.

Adler will preside over the city’s five public retirement funds, conducting investment research and providing advice to the trustees who sit on the boards of the funds.

More from Pensions & Investments:

Mr. Adler most recently had been director of the retirement security campaign for the Service Employees International Union. “He managed all aspects of SEIU’s retirement security program, including public pension funds, Taft-Hartley pensions, Social Security, and private-sector plans,” the news release said.

The office of pensions and investments serves as full-time adviser to mayoral appointees to the boards of each of the five public pension funds that make up the $158.7 billion New York City Retirement Systems and on the board of the $14.9 billion New York City Deferred Compensation Plan.

Mr. Adler’s duties include conducting research “on all relevant investment issues that impact the portfolios,” the news release said. He will provide the mayor’s representatives on the five boards and the deferred compensation plan board “with timely investment reviews, reports and presentations, so that they may make recommendations on asset allocation and investment strategy,” the news release said.

NYC’s five public pension funds collectively manage $158.7 billion in assets.

 

Photo by Tim (Timothy) Pearce via Flickr CC License

San Francisco Pension Backs Off Hedge Funds After Conflicts of Interest Surface

Golden Gate Bridge

San Francisco Employees’ Retirement System (SFERS) was set to vote yesterday on whether the fund should allocate up to 15 percent of assets, or $3 billion, to hedge funds.

But the vote never happened, in part because of the objections of union members and retirees who showed up to the meeting. Recent reports of conflicts of interest surrounding the hedge fund investments probably didn’t help, either.

From the International Business Times:

San Francisco officials on Wednesday tabled a proposal to move up to 15 percent of the city’s $20 billion pension portfolio into hedge funds. The move came a day after International Business Times reported that the consultants advising the city on whether to invest in hedge funds currently operate a hedge fund based in the Cayman Islands.

The hedge fund proposal, spearheaded by the chief investment officer of the San Francisco Employees’ Retirement System, or SFERS, had been scheduled for action this week. If ultimately enacted, it could move up to $3 billion of retiree money from traditional stocks and bonds into hedge funds, potentially costing taxpayers $100 million a year in additional fees.

Pension beneficiaries who oppose the proposal spoke at Wednesday’s meeting of the SFERS board. They cited financial risks and the appearance of possible conflicts of interest in objecting to the hedge fund investments.

Prior to the meeting, the Service Employees International Union, which represents roughly 12,000 members who are eligible for SFERS benefits, asked city officials to have the hedge fund proposal evaluated by a consultant who has worked with boards that have opted against hedge funds.

David Sirota reported on the possible conflicts of interest earlier this week:

[SFERS is] drawing on the counsel of a company called Angeles Investment Advisors, one of a crop of consulting firms that has emerged across the country in recent years to aid municipalities in navigating the murky waters of managing money.

For two decades, Angeles has been employed by the San Francisco pension system to champion the best interests of city taxpayers and employees — the cops, firefighters and other municipal workers who depend on pension payments after their retirement. But the firm is concurrently playing another role that complicates its image as a disinterested guide: An International Business Times review of U.S. Securities and Exchange Commission documents has found that since 2010, Angeles has run a hedge fund based in the Cayman Islands that invests in other hedge funds.

In other words, the consultants that are supposed to be providing unbiased advice about whether San Francisco would be wise to entrust its money to the hedge fund industry are themselves hedge fund players.

SFERS says that, although the vote is tabled for now, it could be brought back at a later time.

This isn’t the first time the pension fund has delayed voting on hedge fund investments. In fact, it’s the third time: the board first delayed the vote in June. Then it delayed the vote again in August.

San Diego Pension Trustees React To Retainment of Controversial CIO

roulette

The San Diego County Employees Retirement System (SDCERS) voted 5-4 last week to retain its controversial CIO, Lee Partridge.

The vote was close, and nearly every trustee had something to say about the decision. From Bloomberg:

“All the sudden we found out we have $22 billion in exposure,” [trustee Dianne] Jacob said by telephone prior to the vote. “That should have never happened. The process is flawed. The hiring of Partridge in the beginning was flawed. Let’s get back to basics.”

[…]

“This is an exorbitant amount of taxpayer dollars being spent and is unprecedented in any other county in California,” [County Treasurer and trustee] McAllister said by e-mail before the vote. “I have strongly opposed the adoption of an outsourced government structure.”

McAllister went on, according to the San Diego Union-Tribune:

“The CEO, Brian White, has put SDCERA in the spotlight for all the wrong reasons,” said County Treasurer Dan McAllister, who serves on the pension board as part of his elected duties. “This is not the behavior we should expect from the CEO of one of the largest public pensions in the state.”

Those trustees were echoing the sentiment of city employees, many of whom had shown up to previous board meetings or written the trustees to express their insecurity with the pension fund’s investment strategy. From the San Diego Union-Tribune:

“You have a responsibility to represent hard-working San Diego County employees,” county employee Tracey Carter, a member of Service Employees International Union 221, told the board prior to the vote. “We have done our due diligence. We have separated headlines from facts. It is time to change direction with the management of the fund.”

But the majority of trustees voted not to fire Partridge. From the San Diego Union-Tribune:

“For those who continue the fear-mongering, shame on you,” said [trustee and board vice-chairman David] Myers.

More of Myers’ reaction from Bloomberg:

“Going forward with the contract is in the best interest of this organization and its members — it saves money,” David Myers, the board’s vice chairman, said at a Sept. 18 meeting. “The dysfunctionality of what is going on right now is, in my opinion, a breach of our responsibility to this organization.”

Salient Partners LP, the firm that employs Partridge, released this statement to Bloomberg:

“ [We] delivered $4.4 billion to SDCERA plan members at a lower cost and with less risk than 80 percent of similarly sized pension plans,” said Chris Moon Ashraf, a spokeswoman for the company at Jennifer Connelly Public Relations. “The average SDCERA plan beneficiary realized more than $111,000 in gains under Mr. Partridge’s stewardship for a total fee over five years of $414.”

The fund’s investment strategy was controversial because the CIO was allowed to use up to 500 percent leverage on certain parts of its portfolio, without seeking approval from the board or the fund’s director.

SDCERS returned just over 13 percent in 2014.

Gina Raimondo Suddenly Pulling In Union Endorsements

Gina Raimondo

Heading into the primary that took place earlier this month, Rhode Island’s democratic candidate for governor Gina Raimondo had notoriously little union support.

That was due to the 2011 pension reforms she spearheaded. Unions, aside from disliking the policy, thought they never got a fair shake during negotiations.

But now Raimondo is pulling in union endorsements by the dozen. Her stance on pensions hasn’t changed. So how is she doing it? The Providence Journal asked the same question:

What did Raimondo tell these unions to win their support?

Neither Raimondo, the state’s general treasurer, nor her Republican opponent, Cranston Mayor Allan Fung, has been willing to make public their written answers on any candidate questionnaires they submitted in pursuit of endorsements.

Why not? They won’t say.

[…]

Gina Raimondo is on a roll, with a new endorsement almost every day this past week.

In the last week alone, the Democratic nominee for governor has picked up glowing endorsements from the International Brotherhood of Electrical Workers Local 99 and an arm of the Service Employees International Union that represents “nearly 1,000 contracted janitors at office buildings in R.I.”

A week earlier, she netted the endorsement of the separate wing of the SEIU that won the right to unionize at-home child-care workers.

Raimondo has now picked up endorsements from 15 unions.

Unions have vocally opposed Raimondo’s 2011 reform efforts for years.

But it could be that they see her as the lesser of two evils; unions could have reason to believe they’d have better luck with Raimondo in office than her Republican challenger, Allan Fung.

But without the release of the questionnaires, we won’t know for sure.