Based in the municipal building next to City Hall, Meier sat down with Pensions & Investments to talk about his first 16 months as CIO and working with a staff of about 110.
"It's a fascinating job," he said. "I feel very connected to New York City."
Meier is in the midst of a strategic review for all five pension funds and their unique needs and asset allocations. Each pension fund — whether for municipal employees, teachers, firefighters or police officers — has its own separate board of trustees, with whom Meier meets separately every month.
When he worked in the private sector at State Street Global Advisors, "I had thousands of client meetings all over the world. Now, all my clients are within walking distance. Their portfolios may differ in terms of weightings and assets, but we really try to leverage our scale."
The largest of the five retirement plans is the $93.7 billion teachers pension fund, and the smallest is the board of education retirement plan at $8.3 billion. To save money on fees, "we buy in bulk and allocate across all five plans. It enables us better economics. We're a significant investor and typically have access to the better private and public managers."
Meier said his office outsources most of the assets to external managers, except for $30 billion in cash managed in-house, the bulk of which is funds available for the city of New York.
Meier has also promoted some staff in his investment office, and wants to raise their pay and diversify his team.
"We meet every week and we also have a separate investment committee. We have a greenlight process to push forward investments. Everyone on the investment committee can ask questions. The committee spans all five plans, and each of those has its own board of trustees. We service and support those plans."
Starting on Jan. 1, 2023, he incorporated a new law that changed the so-called basket clause to allow large pension plans in the state to allocate 35% to alternatives, up from 25%.
"We're in the process of working with consultants in private equity, credit, infrastructure and real estate" to raise those allocations in each plan, he said.
"A public pension plan of our size is not nimble by design. Three plans have approved their strategic asset allocations. We'll start implementing them in December," he said.
Most recently, the aggregate asset allocation across the five pension funds was approximately 43% public equities, 30% public fixed income, 26% alternative investments and 1% cash.
"We expect to see some meaningful increase to private equity and private credit, and probably (remain) flat in hedge funds," he said. The NYC Board of Education Retirement System that is 102% funded is derisking somewhat, "moving more to domestic U.S. equities, away from international, maintaining fixed income and pulling down a bit on alternatives," he said.
Some other pension funds "haven't finalized" their strategic reallocations, but will likely increase private equity allocations to 12% from 8%, he said, which is "meaningful."
That said, "our review looks at how to allocate resources, and not just buy the biggest PE funds out there."
The trustees Meier works with are police, teachers, administrators and firefighters. Very few have a background in institutional investing. Part of his office's education is a weekly thought leadership speaker series every Friday, and annual education events for trustees.
"We make recommendations, and they make the decisions. Everyone has my cell number and they text me on weekends! They have a duty and take it seriously. We emphasize the long term of investments, seven, 10, even 20 years out. We're not market timers. We have strategic allocations."
The CIO also said his office "cares a lot" about ESG.
"It's in the context of fiduciary responsibility. It drives value creation over time. ESG can be a great risk lens. For example, it can help make decisions that reduce risk of litigation, regulatory risk, reputational damage."
Across the five pension plans, the CIO's office votes 100% of their proxies in-house and does not outsource.
"In U.S. public equities, we're in mostly passive" index funds, he said. "But we expect to be in these for decades. And we care greatly about the performance of these mandates over time."
Over all the pension plans, "our single largest allocation is in public, passive equities," with about $52 billion in BlackRock funds, he said. "They haven't pulled back from ESG per se, but they have a business to run. That whole discussion has become way too politicized," Meier said.
The New York City Retirement Systems also commits money to emerging managers through partners such as GCM Grosvenor for real estate, Neuberger Berman for alternatives and BlackRock for infrastructure funds.
"Emerging managers are a function of the size of the manager" launching its first or second fund, he said.
For private equity, Neuberger Berman focuses on investing in first-time funds, and "they have a funnel described as 300 to 400 firms" to choose from, Meier said. "Then they help support those managers providing guidance and set-up and make co-investments alongside of us."
For a second fund investment, "in order for us to get enough size" given the asset base, "we focus on bigger managers. But the great thing about diverse managers is their lower correlation. Some strategies are really unique. The Grosvenor program for real estate, for example, is run by Peter Braffman. He talks about all real estate being local. We think we'll have priority as these managers grow and become more institutional. We'll have better access to get into their funds and partner with them."
The retirement system has about 3.9% of total assets with emerging managers. It also has 12.7% of actively managed U.S. investments run by women- and minority-owned firms, a figure that is expected to grow to 20% by 2029.
Meier's office also hosts a diverse and emerging manager conference annually, which includes all the trustees, consultants and portfolio managers for a round of "speed dating," he said.
"It's a great opportunity to meet the folks behind the New York City retirement plans. We try to provide guidance in terms of our process. We're a public fund so we're committed to transparency with an open policy concept. Anyone who wants to manage money for the city has a right to put their hat in the ring. We don't have specific targets for diverse managers, but we have goals."
Meier is keenly focused on the money the retirement plans pay out in fees. Currently, the total is about $1.4 billion annually.
"How do we manage that? In private markets, we have fees we get reimbursed on, and with our size, my team and I do a great job of squeezing down fees and carry. We do no-carry, no-fee co-investments as well. For me its value for money," he said.
Some index fund mandates in passive public equity cost two-tenths of 1 basis point, he said, mostly through State Street Global Advisors and BlackRock via separately managed accounts.
Consultants also are willing to negotiate on fees.
"Given our size, we've got five plans each with their own general consultant. Those consultants report to the trustees. We also have specialty consultants with expertise in hedge funds, private equity, infrastructure, and core and non-core real estate. We don't have one for private credit. That's just cost savings."
Meier said he's cautiously optimistic on private credit, which currently has a 4% allocation.
"Base rates are higher and these are floating-rate funds. We think highly of private credit and we are being cautious. We focus on larger borrowers with first-lien super senior loans. We're not moving down in credit quality to take on risk. They can deliver 10%-14% with equity warrants as well. But you want to be really selective. Returns there are compelling but you want to be smart and careful."
His timeline for increasing allocations to private markets is over five years.
"We have a five-year plan for private assets. I keep telling trustees that given the denominator effect, our allocations have gone above their target, but at end of year we have a new pacing plan and will make adjustments. Historically, when people make money, it's when markets are distressed, when there's a problem."