I am writing at the direction of the board of trustees. After reading the June 29, page 1 article "NYCERS sends big bucks up in smoke" and your July 13 editorial "Fiduciary diversion," we believe neither the article nor editorial conveyed to your readers the responsible process the New York City Employees' Retirement System trustees undertook in examining continued investment in tobacco.
The NYCERS' trustees have a fiduciary obligation to the almost 300,000 members and beneficiaries to invest the system's $38 billion in assets in a prudent and responsible manner. It is precisely because of that duty that the trustees carefully reviewed the financial, legal, regulatory and legislative issues associated with tobacco investment. They were not guided as your editorial stated by parochial political or economic considerations. Uninformed reporting of the process and subsequently memorializing this erroneous perspective on your editorial page unnecessarily diminished the substantive process undertaken by the board of trustees.
It was after this thorough examination that the office of the comptroller, District Council 37, International Brotherhood of Teamsters Local 237, Transport Workers Union Local 100 and Bronx Borough President Fernando Ferrer sponsored a resolution. The resolution to implement a restriction of additional purchases of tobacco stocks in the NYCERS domestic index portfolio was approved unanimously by the board (the Office of Public Advocate abstained).
Your readers also should be aware that the independent financial consultant retained by the board found that, over the long term, tobacco stocks have performed well as an investment. Over the last three years, however, there has been some deterioration in the financial characteristics. The report recommended "a measured or staged approach to divestiture." The report also pointed out that divestment, at the present time, would not be in the interest of the plan's beneficiaries.
This is not to imply the pension fund should deliberately choose to benefit from tobacco. In fact, the members of the board of trustees in their roles as elected officials and municipal union leaders have strongly supported the enactment of some of the strongest anti-tobacco measures in the country.
Throughout the process, the trustees were guided by their fiduciary obligation to act in the best interest of the plan's participants and beneficiaries. It is this careful and deliberative process that has led NYCERS to achieve investment results that have been in the top decile of large public plans for the three-, five- and 10-year periods. Criticism for careful exercise of our fiduciary responsibility is unwarranted.
John J. Murphy
Executive director
New York City Employees' Retirement System
New York
DC vs. DB results
With respect to the page 16 article in the June 1 issue discussing the B.J. Vincent Canadian Pooled fund survey, I would like to clarify that the survey does not actually study investment results of DC versus DB plans.
In discussion with the author of the article I had indicated that the money deposit results would equate well to the results a DC plan member might have realized over the period of the study included in the survey.
I also suggested that the returns realized in the pooled funds, during the bull markets (both equity and bond) that we have experienced over the last eight or nine years, were substantially better than the comparable returns most DB plan members would have realized if there had been a conversion of their defined benefits earned over the same time period.
I did not mean to suggest that the lump sum results of the survey equated to DB plan returns.
It is hoped that over time we will be able to find ways of making even better and statistically credible analysis of the type discussed in the article. I would also like to add that we very much appreciate the efforts Pensions & Investments makes to include news and information from north of the border.
Donald M. Armstrong
Senior Consultant
Donaldson Vincent Associates
North York, Ontario
