Thursday, April 9, 2015

They Never Get Anything Right

The Comptroller made a big splash yesterday. He finally discovered after nine and half years that the city pension funds are paying high investment fees and getting nothing for it. Hell, it is worse than that. They are losing money.

One thing he hasn't yet discovered is that he can't add. The fees are $3.5B over the last ten years, not $2.B.

For this princely fee, the combined five city funds had an average annual rate of return of 5.68% for the ten years. A simple stock index/core bond return for the ten years was 6.59%. That difference translates into a loss of $18.8B ($163.3B - $144.5B)

So what is the Comptroller going to do about it? Not a damn thing. Of course, he could go public with all the secret investment contracts and and the cash flow histories of all the terminated alternative investments. The newspapers would have field day with that.

Where are all the brilliant trustees?

One of the absolute laws of nature is: Never trust anyone, especially with your money.

For the record, here are the fees for the last ten years:

  • 2014: $522M
  • 2013: $473M
  • 2012: $370M
  • 2011: $396M
  • 2010: $427M
  • 2009: $339M
  • 2008: $310M
  • 2007: $262M
  • 2006: $193M
  • 2005: $158M

Another point of confusion is the total value of the five city pension funds. As of June 30, 2014 is was $144.5B, not $175.4B. You don't include the $32.9B that is in the teacher's TDA fund and the police & fire VSF funds. This money does not cover any pension liabilities.

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