New York City pensions boast of strong returns

The Big Apple's pension funds, who have been active investors in private debt funds, are achieving some of the best returns in the past five years, putting their total assets at a peak of $160 billion.

This was a good (fiscal) year for the Big Apple's pension funds. Collectively, the five pension funds that make up the New York City Retirement Systems returned 17.4 percent for the year ending June 30, putting the total value of the pension funds at $160.5 billion, the highest it’s ever been.

Abysmal performance during the financial crisis seems like a distant memory, as the New York City fund and many others have enjoyed good performance for several years now. “Five years of positive returns are good news for the pension funds and for the city,” New York City Comptroller Scott Stringer said in a statement. 

He credited the pensions’ boards of trustees, investment staff and the bureau of asset management with achieving these results, adding that, “any year in which the pension funds achieve double the assumed rate of return is a good year in my book.”  The funds currently have an actuarial assumed rate of return of 7 percent.

These returns marked one of the strongest periods in the last five years for the pension funds. The retirement systems returned 12.1 percent in fiscal year 2013, 1.4 percent in in 2012, 23.2 percent in in 2011 and 14.2 percent in in 2010.

A spokesman for the Comptroller said specific breakouts on the asset classes and strategies that performed well were not yet available, but would be released in September. However, PDI's Research and Analytics division shows the five New York pensions have significant exposure to alternative credit funds. 

New York City Employees' Retirement System, for instance, has backed the likes of Pegasus Capital Advisors and  Clearlake Capital Group. 

New York State Teachers' Retirement System has also backed Clearlake, as well as firms including Oaktree Capital Management and a recent commitment to ABRY Partners' latest vehicle. 

New York City Police Pension Fund has made commitments to funds managed by Avenue Capital, Arrowhead Mezzanine, GSO Capital Partners and Levine Leichtman Capital Partners. 

New York City Fire Department Pension Fund's commitments include those to Comvest Investment Partners and Black Diamond Capital Management. 

“The Fiscal Year 2014 returns were unusually strong given the current investment environment. Strong growth in our equities portfolio coupled with a diversified investment strategy have the pension funds well-positioned for the long-term. Our asset management team will continue to strive for excellent investment results in the years ahead,” said newly minted CIO Scott Evans, who started on the job two weeks ago and was previously a senior executive at asset management firm TIAA-CREF.

Stringer, a democrat and formerly the Manhattan borough president, was elected into office last year. The Comptroller, along with the five separate boards of trustees, oversee the City’s five pension funds, and the Comptroller usually brings in his own investment staff. Larry Schloss, the CIO under former comptroller John Liu, has since moved on to Angelo Gordon, and Seema Hingorani, who recently left the pension fund, had agreed to stay on as interim CIO until Stringer named a new one.

Schloss and Hingorani were credited with diversifying the plan into alternatives during their tenure, as well as getting rid of underperforming traditional investment managers.