New York Gov. Andrew Cuomo on Thursday vetoed a bill that would have allowed the largest public pension funds in the state to increase their allocations to alternative investments to 30% from 25%.
The bill, approved by the state Legislature in June, would have affected the $178.3 billion New York State Common Retirement Fund, Albany; $158.7 billion New York City Retirement Systems; and $108.2 billion New York State Teachers’ Retirement System, Albany. The original bill would have raised the allocation limit to 35%, but it was amended to a 30% limit.
State law contains a provision known as the basket clause, which says the public pension funds are governed by a “legal list” that consists primarily of fixed income and equity investments. The pension funds can allocate up to 25% of assets outside the legal list in a basket of investments that includes hedge funds, commodities, private equity and international bonds.
“The existing statutory limits on the investment of public pension funds are carefully designed to achieve the appropriate balance between promoting growth and limiting risk,” Mr. Cuomo said in a veto message. “This bill would undermine that balance by potentially exposing hard-earned pension savings to the increased risk and higher fees frequently associated with the class of investment assets permissible under this bill.”
Supporters of the bill, most notably the New York City Retirement Systems, said expanding the basket clause would give the pension funds greater flexibility in asset management.
“In the coming year, we will continue to work with our partners in the Legislature and Gov. Cuomo to pass this bill,” Eric Sumberg, a spokesman for New York City Comptroller Scott Stringer, wrote Thursday in an e-mail. Mr. Stringer is the fiduciary for the five public pension funds that make up the New York City Retirement Systems.
John Cardillo, a spokesman for the New York State Teachers’ Retirement System, declined to comment Thursday.
Matthew Sweeney, a spokesman for state Comptroller Thomas DiNapoli, did not respond to questions by press time. Mr. DiNapoli is the sole trustee of the New York State Common Retirement Fund.
Bloomberg contributed to this story