NEW YORK — After years of talk, New York City's five pension systems might soon be making maiden allocations to hedge funds, and later could venture into infrastructure, commodities, 130/30 and other alternative investment strategies.
With $100 billion in aggregate defined benefit plan assets as of Sept. 30, even a 1% allocation by the New York City Retirement Systems would mean big money for hedge fund and fund-of-funds managers. If one or all of the city's five pension funds decided on a more typical allocation of between 2% and 5%, the money in motion could easily total $5 billion.
Hedge fund and fund-of-funds managers — especially those based along the densely populated stretch of Third Avenue in Manhattan known as "hedge fund alley" — have been salivating for years over the possibility of getting even a tiny bite of the Big Apple's public pension fund assets.
Staffers in the office of New York City Comptroller William C. Thompson Jr. have been conducting trustee hedge fund education workshops for more than two years. Diminishing return expectations for traditional asset classes and ever-increasing liabilities were behind the educational push, said Joseph Haslip, deputy comptroller for pensions.
The comptroller's staff is close to asking trustees if they are ready to take the investment plunge.
Mr. Thompson's office is the investment adviser and custodian to the funds, known in aggregate as New York City Retirement Systems: the New York City Employees' Retirement System, with defined benefit assets of $38.1 billion as of Sept. 30; Teachers' Retirement System of the City of New York, $33.9 billion; New York City Police Pension Fund, $19.3 billion; the New York City Fire Department Pension Fund, $6.5 billion; and the Board of Education Retirement System of the City of New York, $2.2 billion. Assets for the latter funds were not available at press time. Each fund has a separate board that often works with its own consultants in making independent asset allocation decisions. The comptroller's asset management division handles investment manager searches and the administration of the five pension funds.