Secure your future

Pension fund does well by doing good


The Tier IV pension clinic on July 11 at UFT headquarters will take place from 3:30 to 6:30 p.m. The time for that session was listed incorrectly in previous issues of the New York Teacher.

The other Tier IV session, on Aug. 22, will be held from 10 a.m. to 1 p.m.

The UFT’s popular pension clinics — a mini-course in pensions and related retirement matters — will continue to run through the summer months, beginning with sessions for Tiers I/II on July 9 and 10.

All members are urged to participate in these clinics two or three years before retirement. The clinics are only one part of the UFT’s many services devoted to helping members prepare for a financially secure retirement.

All clinics during the summer will take place at UFT headquarters, 52 Broadway, Manhattan.

Go to the Pension Clinic page for the full schedule >>

You may not know this but a small percentage of our retirement funds are invested in creating affordable housing and jobs in New York City neighborhoods. These investments earn us market-rate returns.

You see, the Teachers’ Retirement System works to help secure members’ retirement by strategically investing our pension funds in several different asset classes, such as stocks, bonds and real estate. That way at any given time, weakness in one class of investments can be offset by strength in another. Another type of investment, in initiatives such as to create affordable housing and jobs, are known as Economically Targeted Investments or ETIs.

Public pension funds around the country have Economically Targeted Inventment programs as part of their investment strategies, and ours may have been one of the first, having started in 1981. Since then, the program, which makes up about 2 percent of the system’s total investments, has posted solid returns. As of Dec. 31, 2012, it had earned 5.80 percent for one year, 6.64 percent for five years, 5.83 percent for 10 years and 8.82 percent since inception.

One of the Teachers’ Retirement System’s longer-running Economically Targeted Investments is the Public Private Apartment Rehabilitation Program. This very successful program provides mortgages for rehabilitation or new construction of affordable housing and commercial space in low-, moderate- and middle-income residential neighborhoods.

Since this initiative began in 1990, the retirement system has invested more than $162 million to develop more than 9,100 affordable-housing apartments in all five boroughs. It has commitments to invest $121 million more for an additional 5,500 apartments.

This building program works by enticing lenders, who have been approved by the retirement system’s trustees, to underwrite construction loans for building projects. In return for the construction financing, the program commits to providing a long-term (up to 30-year) mortgage at a market rate once the building project is complete. The overwhelming majority of projects are affordable, multifamily apartment buildings for tenants with very low to middle incomes.

Also participating in this initiative are the city’s other four retirement systems for public employees — the NYC Employees’ Retirement System, the Board of Education Retirement System, the Police Pension Fund and the Fire Department Pension Fund.

Safe lending and job creation

The Teachers’ Retirement System has also joined with the other four city pension funds in an Economically Targeted Investment called the Anti-Predatory Lending Separate Account. This initiative aims to encourage responsible lending by investing in securities backed by mortgages issued to lower- to middle-income New York City homeowners. The retirement system has invested $33 million in this program that buys securities only from lenders that commit to issuing nonpredatory loans.

The importance of the initiative is apparent. In the lead-up to the recent credit crisis, many low- and middle-income homeowners, a large number of them women or minorities, were given mortgages out of line with their incomes. Either they were approved for loans that their incomes could not support or they received high-interest loans when they could have qualified for so-called prime or lower-cost loans. There have been few delinquent or defaulting loans in this program’s portfolio, which indicates that the loans have matched the abilities of the borrowers to repay.

Economically Targeted Investments can also be an engine for creating jobs. The retirement system’s program has $209 million invested in the AFL-CIO Housing Investment Trust, which has a joint mission of providing affordable housing and creating union jobs.

Since January 2002, the trust’s investments have provided employment for up to 3,000 union workers in developing or rehabilitating more than 21,800 units of affordable multifamily housing in New York City. Among its investments is $134 million for capital improvements at the Penn South Cooperative Apartments in Midtown.

Penn South was created by the union movement in the 1960s as a place for working families to live together cooperatively and affordably. Its residents include many UFT members and their families. The investment by the AFL-CIO trust will enable Penn South to create 600 union-construction jobs over the next 20 years and to keep its 2,820 units affordable.

It is also a requirement of our Economically Targeted Investment program that all contractors hired with our funds follow a responsible contractor policy, which includes the payment of fair wages and benefits to workers.

The retirement system’s Economically Targeted Investments have so far been in fixed-income instruments such as mortgages. But in December 2012, the five New York City retirement systems approved investing a combined $155 million in a real estate equity fund. This new investment will make us part owners in revitalized multifamily housing and commercial retail space in lower-income communities in the outer boroughs. The investments will be in neighborhoods poised for economic growth and are expected to garner a risk-adjusted market rate of return.

Rebuilding after Sandy

In addition, the Teachers’ Retirement System and three other city retirement systems have identified a need for funding to help repair affordable housing and commercial space damaged or destroyed by Superstorm Sandy. The plan calls for initially investing $500 million in residential and commercial real estate in areas affected by the storm. Eventually, the investment will total $1.5 billion to repair or rebuild up to 3,000 housing units and 150,000 to 200,000 square feet of commercial space. To help meet the needs of New York City families affected by Sandy, the plan is for these residents to be given preference for rental of units that are repaired or rebuilt.

A second Sandy-related program by the pension funds will offer loans or equity investments to owners of damaged or destroyed buildings to supplement insurance proceeds for restoring the properties. A third program will aim to create a mix of market-rate housing for middle-income families in hurricane zones A, B and C that incorporates sustainable building materials and demonstrates flood resiliency.

We are proud of our Economically Targeted Investment program for making prudent investments that achieve excellent returns while benefiting working families in our city. We rigorously analyze and vet each one of these investments, comparing its risk and return to that of other similar investments, before we consider the social impact. It is a great bonus that our investments have contributed to the preservation, rehabilitation and creation of affordable housing in our city and have supported the creation of union jobs.

We would like to thank the staff in the city comptroller’s office for its help in preparing this column.

The unit value is computed during the latter part of each month. Recent values are:
Diversified Equity
International Equity
Inflation Protection
Socially Responsive
February 65.154 18.956 9.658 11.719 11.332
March 65.582 18.943 9.546 11.661 11.706
April 67.617 18.904 9.636 11.621 12.109
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