New York City Retirement Systems paid $708.9 million in fees to investment managers for the fiscal year ended June 30, reflecting what pension fund officials say is the most detailed look at expenses.
The figure represented a 33.7% increase over the $530.2 million in fees reported for the fiscal year ended June 30, 2014. However, the most recent fiscal year's accounting includes many incentive fees that hadn't been identified in previous annual reports.
“Since we started the hard work of reforming the investment environment 22 months ago, we've uncovered layer after layer of Wall Street fees,” city Comptroller Scott Stringer said Wednesday in an e-mail. Mr. Stringer is the fiduciary for the five pension funds that make up the $162.9 billion retirement system.
“In our review of this year's financial report we've found even more charges — millions of dollars in 'incentive fees' — that had gone largely unreported in previous reports,” Mr. Stringer added.
Last month, Mr. Stringer and Chief Investment Officer Scott Evans told managers of private equity firms and hedge funds that they must provide greater details and transparency about fees. Otherwise, they will recommend to the boards of trustees of the five pension funds to avoid increasing commitments or adding new commitments to these managers.
“Sunlight is a great disinfectant,” Mr. Stringer wrote Wednesday. “Bringing these costs out of the shadows is another important step in delivering greater value to the 715,000 police officers, school teachers and city workers who rely on the city's five pension funds for their retirement security.”
City officials said they believe the latest information covers most of the investment management fees, adding that the new rules for fee transparency will provide an even more accurate picture.
In April, when Mr. Stringer called for a pension system overhaul, he said greater fee transparency would improve the retirement system's ability to correlate management fees with performance and to enhance manager selection.
“While we believe we've captured the bulk of the fee data, we will continue to refine our reporting and transparency processes until we have a complete picture of all fees and expenses paid,” said Eric Sumberg, a spokesman for Mr. Stringer, in an e-mail. “The comptroller has made transparency and fee disclosure priority issues for his administration.”
At this point, the pension funds haven't broken out fees by asset class. The comptroller's investment staff worked with consultants to prepare the fee information.
In its October letter to private equity and hedge fund managers, city officials asked for fees based on asset class and type, such as commingled fund or separate account. The fee information will be posted on the comptroller's website.
The letter also asked that each manager prepare a one-time analysis to each pension fund of base fees, performance fees and other fees charged by each investment option. The letter asked that this information be provided by year-end, adding that future information about fees must be provided quarterly.
New York City Retirement Systems posted a 3.15% return on investment, net of fees, for the fiscal year ended June 30.
