New York City’s pension system can cope with short-term market volatility caused by President Donald Trump’s “chaotic trade policy,” but sustained market losses will harm pension fund investments and participants, said Brad Lander, the city comptroller and custodian of the five pension funds in the $285 billion city pension system, in a report April 16.
“Despite the recent angst associated with the spike in market volatility and decline in asset prices, the five New York City public pension systems remain well-positioned to weather these temporary market situations,” Lander wrote in the report, “Taking Trump’s Tariffs Seriously: The Fiscal and Economic impact for NYC.”
The pension system can absorb short-term volatility due its “extended investment horizon reflecting the long-term nature of the pension systems’ obligations,” the report said. “Benefits are guaranteed to members regardless of investment returns.”
Among the built-in pension fund protections, the report cited:
- “The portfolios of investments and pension liabilities extend well beyond business and market cycles and will span many political administrations.”
- "The portfolios are designed to be resilient through careful and considered asset class, strategy, manager and geographic diversification."
- "The pension systems have ample liquidity within their portfolio holdings to meet benefit payment and capital call obligations, and we are not seeing excessive distress among external investment managers caused by recent market volatility.”
However, sustained economic turmoil and market losses will harm investments, which could force aggregate pension system returns to fall below the 7% assumed rate of return, the report said. If that happens, the city must pay more into the pension system.
“The change in contribution is phased in over five fiscal years to avoid drastic changes in city contributions due to market conditions,” the report said.
“For each percentage point below the 7% return assumption in FY 2025, the city’s pension contributions would increase by approximately $58 million starting in FY 2027 growing to $329 million in FY 2031,” the report said. The city's fiscal year runs from July 1 to June 30.
The pension system posted a net return of 10% for the fiscal year ended June 30, 2024. The three-year annualized return was 2.8%. The five-year annualized return was 7.4%. The 10-year annualized return was 7.4%.
The funding ratio for the pension system was 83% for the fiscal year ended June 30, 2023, the latest data available.
The report’s comments on pension funds was part of a larger warning about what Trump’s policies could do to city finances and the need for greater city reserve funds.
“Given the looming clouds on the economic horizon, the city should make a sizable deposit in its rainy-day funds this year as well as $1 billion in the general reserve,” the report said.
The report discussed three possible impacts from Trump’s policies: no recession, mild recession and deeper recession. Any recession would push expected city revenues below those projected by the mayor’s office for fiscal year 2026 and fiscal year 2027, the report said.
