Pennsylvania state Treasurer Joe Torsella commended the $55.8 billion Pennsylvania Public School Employees' Retirement System, Harrisburg, for recently cutting its allocation to risk parity, a spokesman for the treasurer confirmed in an email.
"It's time that more pension funds wake up to the fact that Wall Street has, in many cases, sold them something close to modern-day snake oil," Mr. Torsella said in a news release, adding that "Wall Street managers" continue to charge plans large fees even if their strategies fail to perform.
"What so many active Wall Street managers have sold our nation's pension funds on is the idea that — for a hefty set of fees — they can help pensions experience almost all of the gains and none of the losses," he said. "We need to recognize that for the fantasy that it is."
As Pensions & Investments previously reported, the PennPSERS board agreed in August to eliminate its 8% allocation to risk parity. Within the pension plan's risk-parity allocation was roughly $2 billion allocated to four strategies managed by BlackRock, Bridgewater Associates and D.E. Shaw Group, which will be terminated.
Spokeswomen from BlackRock and D.E. Shaw declined to comment. Representatives from Bridgewater could not be immediately reached for comment.