Staffing and compensation constraints could have a negative effect on the $178.1 billion New York State Common Retirement Fund, Albany, a new report warns.
The fiduciary and conflict-of-interest review of the pension fund’s investment operations — released Thursday by state Comptroller Thomas P. DiNapoli — was conducted by Funston Advisory Services. The New York State Department of Insurance mandated in 2008 that an independent fiduciary and conflict-of-interest review be completed every three years.
The current review covers the period from April 1, 2012, through March 31, 2015. During that time, the pension fund completed a total of 96 investment transactions that were approved by Mr. DiNapoli, who is sole trustee of the pension fund.
The review found all transactions were completed properly and the overall governance framework to be “sound, with several opportunities for improvement,” all of which would require additional staffing and resources, including developing a standard approach for “reporting the expanded fee and expense information for private equity to improve transparency and comparability,” the report said, and developing a formalized liquidity management process.
The report also said: “While the fund is currently well-managed, compared to most peers, it remains severely understaffed for its scale and complexity, with underdeveloped risk analysis and management capabilities and an over-reliance on outsourced investment management and support functions.”
“Since taking office, I have sought to establish our state’s pension fund as a leader in transparency, ethics and effectiveness. It’s gratifying to have an independent voice affirm our efforts,” Mr. DiNapoli said in a news release announcing the release of the review. “Our staff has helped build one of the nation’s strongest pension funds, but only with competitive compensation and additional resources can we accomplish all that we need to do to manage the fund effectively and efficiently. Our task going forward will be to expand and enhance our team and our internal expertise to better meet the challenges and risks of an increasingly volatile global market.”
The complete report is available on the state comptroller’s website.