New York State Common Retirement Fund, Albany, is “thinly staffed” for such a large and complex fund, especially in several asset classes, an independent advisory firm reported Tuesday.
Insufficient staffing has caused the fund to delay achieving long-term asset allocation targets, to rely more on consultants than many peers and to have higher investment management costs because it cannot “efficiently gain exposure to various asset classes and management styles,” according to a report reviewing the $150.1 billion pension fund by Funston Advisory Services.
“While these issues have not prevented the fund from managing the existing investment program effectively, it has slowed development and implementation of new strategies,” the report said.
The review found that the fund broadly meets or exceeds industry standards for fulfilling fiduciary responsibilities, achieving ethical standards and providing transparency in disclosing its activities.
The review lauded the fund's “strong and effective framework for operations and decision making processes,” its “high level of operational transparency.” It also found that “fiduciary and ethics training for committees seems exemplary (and that) information .
In a telephone news conference, Thomas DiNapoli, the state comptroller and sole trustee of the fund, said that he had wanted to “set the standard for transparency and ethics” when he become comptroller. The Funston report “is a validation that we are on the right path,” he said. “This is not the end.”
In addition to low staffing levels, the Funston report attributed some fund shortcomings to the “turmoil” in the last decade relating to the 2007 pay-for-play scandal involving former Comptroller Alan Hevesi and the 2008-2009 economic crisis.
“The effects of these crises, combined with the resultant changes in leadership, and lack of investment staff in asset classes targeted for growth have slowed the (fund's) progress towards achieving its 2009 target-asset allocation plan,” the review said.
The report acknowledged that “staffing and compensation may be subject to external approvals and significantly limited.” The New York fund is an example in which “fiduciaries often have full fiduciary responsibility but less than full fiduciary authority,” the report said. However, “the fiduciary must still address the same investment considerations as if they had no resource or other constraints.”
State law requires a fiduciary and conflict of interest review of the fund every three years. The Funston firm conducted the review for the three fiscal years ended March 31, 2012. The firm conducted its analysis from early September 2012 through January 2013.