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Plan in works to improve pension fund returns
by Michael Hirsch | November 10, 2011 New York Teacher issue
UFT President Michael Mulgrew, City Comptroller John Liu, Mayor Michael Bloomberg and other municipal union leaders announced an agreement in principle on Oct. 27 to create a new investment advisory board that will oversee the investment process for all five New York City pension funds. The UFT pension trustees would continue to have complete control over the investments of the Teachers’ Retirement System under this new plan.
The plan, still in its exploratory phase, will need approval from Albany.
The aim is to increase the professionalism of the investment decisions and improve the returns on investments while reducing investment fees and consultant costs. No changes are being made to members’ pension benefits.
While the TRS pension fund is already high-performing, UFT officials are hopeful that the new investment process, with its lower up-front costs, could allow the fund to earn 1 to 2 percentage points a year more.
Explaining in an email to members why the UFT supported the move, Mulgrew said, “We are always looking for opportunities to expand and enhance the efficiency and value of the Teachers’ Retirement System pension fund.”
The decision to seek to streamline the investment advisory function of the five pension funds followed months of discussion and research.
“The idea is to find ways to boost the fund’s performance by streamlining and modernizing the process by which investments are made, thereby increasing the fund’s efficiency and the rate of returns,” said Mulgrew. “That includes removing extra layers of consultants and further depoliticizing the investment process.”
Currently, the Teachers’ Retirement System, the Police Pension Fund, the Fire Department Pension Fund, the New York City Employees Retirement System and the Board of Education Retirement System each hires its own set of investment consultants through a competitive bidding process, but formally delegates advice on investment to the City Comptroller’s Office. Under the new plan, each board would delegate investment advisement to the new investment advisory board instead.
The boards of the five retirement systems will remain intact and continue to fulfill all of their current responsibilities.
The investment advisory board being considered would hire a chief investment officer who would oversee an independent, full-time staff. To guarantee political independence, the chief investment officer would be appointed to a fixed term that did not coincide with the terms of any city elected officials.
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