(Updated Sept. 11)
The New York City Retirement Systems and its five pension funds need a combination of cooperation and consolidation to reduce overall fund expenses and streamline decision-making, said Scott Stringer, the Democratic candidate for city comptroller — a job that includes being custodian and administrator of the $137 billion pension system.
“I think it's essential that the five funds work closely together to become more aligned,” Mr. Stringer said in an interview with Pensions & Investments before the primary.
Mr. Stringer beat Eliot Spitzer, the former New York state attorney general and governor, in the Sept. 10 Democratic primary. Mr. Stringer will face Republican candidate John L. Burnett in the Nov. 5 general election.
Mr. Stringer is the Manhattan borough president and has been a trustee for nearly eight years on one of those five funds, the $46.9 billion New York City Employees' Retirement System.
Each fund is financially independent and has its own board of trustees — a total of 58 for the five funds. The investment policies are adopted by each board's trustees, and each board sets its fund's asset allocation policy and investment objectives.
“We have to lessen the amount of bureaucracy and fees that are associated with these funds just operating on their own,” Mr. Stringer said. “The only way we can get pension reform is to work collaboratively with the 58 trustees. ... You can't just bang your fist and say there will be consolidation or there will be (fewer) trustees. It's not going to happen because the trustees won't vote for that, and they won't support it in Albany.” Any change requires a new state law.
Mr. Stringer stopped short of recommending a more dramatic overhaul similar to the ill-fated effort in 2011 and 2012 by Mayor Michael Bloomberg and Comptroller John Liu. Among other things, they wanted to delegate investment authority to a single pension investment board and make the Bureau of Asset Management, now part of the comptroller's office, a separate, independent investment operation. The assets of the five funds would have remained separate.
The Liu-Bloomberg plan failed to secure adequate support from many city unions, some of whose members are trustees on the boards of the five funds. The Liu-Bloomberg plan, “though well intentioned,” failed because “there was not the political skill-set or political will to get a result,” Mr. Stringer said.
Mr. Bloomberg is completing his third four-year term as mayor this year. Mr. Liu ran for mayor in the Democratic primary.
Among his proposals to be comptroller, Mr. Stringer said he would try to reduce the amount of management fees paid by the pension system each year. “I want to see what investments we can bring in-house” to reduce the fees, he said.
No assets in the city's pension system are managed internally. One big reason is that investment professionals in the New York City Bureau of Asset Management earn far less than employees of money management firms. The average salary for a Bureau of Asset Management investment employee is $100,000, confirmed Matthew Sweeney, a spokesman for Mr. Liu.
The Bureau of Asset Management helps the five funds select investment managers and consultants, manages the cash allocations and directs money to investment advisers, according to the comptroller's website. It also analyzes the performance of managers and their investments.
Low salaries a problem
Mr. Stringer acknowledged the low salaries but added: “There are people who at times in their lives have made a lot more money in the private sector, but love the fact that they could spend time in government … and that has been the reason why city governments and state governments sometimes attract the best and the brightest — people who sometimes take salary cuts because they want to work in the public interest.”
Mr. Stringer said there have been discussions among the five funds “about looking at ways to raise salaries and increase that capacity because we also can't be na´ve and figure that $100,000 is going to attract the people that we may need. That's certainly a discussion the comptroller has to have with the trustees on Jan. 1.”
Another suggestion for reducing fees would be “building relationships with other institutional investors to leverage the totality of the funds beyond our (pension) funds (so we) could also negotiate better fees,” he said.
Mr. Stringer also said he would create the job of chief risk officer “as a way of hedging against the volatility of what this market has been about.”
Citing the city pension system's “proud tradition on corporate governance,” Mr. Stringer said he would continue the strategy of offering shareholder resolutions to encourage improvements in corporate environmental records, workers' rights and performance-based CEO compensation.
“I think we have played a positive role in a lot of different areas,” he said. Given the pension system's size, “we have an obligation to play a role on the national stage especially with Fortune 500 companies that we are investing in.”
Despite the system's size, however,” we can't change (corporate) policy by the power of our vote,” he added. “We have to work collaboratively with those corporations. We have to work with other shareholders to put in place positive changes.”