Listed in the chart below are the investment expenses for asset classes in the NYCERS portfolio, in particular , U.S. equities and private equity funds.
The chart clearly lays out systematic lunacy in NYCERS investment strategy as highlighted by the differences in these two classes. One, U.S. equities is effective and inexpensive and the other, private equity, is ineffective and grossly expensive.
Private equity and other limited partnerships have exploded in the last 25 years. NYCERS is not alone in this insanity. Many other pension funds are infected with this disease including the other four city pension funds.
We all know the story of "The Emperor's New Clothes". This emperor is not only vain but deaf, dumb, and blind. On a more fundamental basis this is how the rich legally take from the poor.
Overview
As of June 30, 2024, NYCERS had a closing balance of $87.93 billion in assets up from $82.43 in FY-2023.
NYCERS paid $572.03 million in investment expenses in FY-2024 up from $489.90 million in FY-2023.
The total expenses for the five city pension funds were $1.95 billion for FY-2024.
The City is always pressed for revenue and yet it allows this bleeding to continue.
U.S. Stocks
Of the $87.93B amount, NYCERS reported $$22.10B in U.S. stocks for which NYCERS paid $16.76 million in management fees.
Of the $22.10B amount, $15.26 billion was in two index funds for which NYCERS paid only $307,483 in management fees.
The value of this asset class is based on the closing values of U.S. stock markets as of June 30, 2024. The open markets make this asset class totally liquid.
NYCERS reported that this class had a rate of return for the year of 22.98% for FY-2024. This figure is based on the closing market stock prices as of June 30th of the previous year and the current year, dividends paid during the year, and the purchase and sale of stocks during the year. Fees are netted out starting in 2015.
Private Equity
Of the $87.93B amount, NYCERS reported $9.20 billion in private equity funds for which NYCERS paid $229.09 million in fees and organization costs.
NYCERS provides no description of what organization costs are. Of the $229.09 million amount organization costs were $64.74 million.
The value of this asset class is based on a best guess (NAV) by the 81 general partners running all the private equity funds. This is because there are no public markets for private equity funds. You have to take this number with a big grain of salt. Some general partners manage more than one fund.
NYCERS reports that this class had a rate of return for the year of 5.09% for FY-2024.
NYCERS does not document how this number is arrived at. Actually, there is no rate of return for private equity funds as a class, only for individual funds and only at the point when the fund closes and makes its last distribution. Each fund should be reported out when it closes. Of course, this would create tremendous PR problems. While some funds may have respectable returns in spite of high fees, others would be horrific disasters.
I suspect, however, that the black box contracts that NYCERS signs with the general partners prohibit NYCERS from publishing the final results.
Also, because there are no public markets for private equity funds, this class is not liquid. NYCERS could possibly sell its position in a particular fund but only at a steep discount and only if there was a buyer.
Investment Expense Tables 2020-2024
| CLass/Year (in millions) | 2024 | 2023 | 2022 | 2021 | 2020 | * | 2015 | 2010 | 2005 | 2000 |
| Fixed Income | $26.63 | $24.99 | $26.95 | $27.65 | $23.92 | * | $17.81 | $14.80 | $10.35 | $10.22 |
| US Equities | $16.75 | $13.67 | $16.88 | $14.71 | $8.85 | * | $17.06 | $14.68 | $6.47 | $8.74 |
| Private Equity | $163.36 | 169.77 | $77.61 | $67.94 | $66.09 | * | $40.35 | $58.77 | $9.70 | $2.83 |
| Private Eq. Org. Costs | $64.73 | $34.69 | $19.82 | $19.16 | $21.73 | * | $13.03 | $28.84 | * | * |
| Alternative Opport/Global FI | $34.17 | 31.22 | $21.65 | $21.70 | $14.97 | * | $12.65 | * | * | * |
| Alternative Opport/Global FI Org. Costs | $2.40 | 3.88 | $1.67 | $1.76 | $0.25 | * | $4.51 | $0.0 | * | * |
| Private Real Estate | 89.93 | $75.18 | $46.68 | $43.20 | $31.96 | * | $17.78 | $17.32 | $1.66* | * |
| Real Estate/Infrastructure Org. Costs | $38.41 | 23.64 | $20.21 | $10.68 | $8.17 | * | $5.11 | $3.15 | * | * |
| Infrasructure | $39.98 | $36.64 | $20.80 | $15.72 | $13.32 | * | * | * | * | * |
| International Equities | $45.44 | 41.11 | $44.69 | $41.38 | 32.22 | * | $31.73 | $28.15 | $15.84 | $14.82 |
| Hedge Funds | * | * | * | * | * | * | $39.79 | * | * | * |
| Mutual Fund - Domestic Equity | * | * | * | * | * | * | -$0.01* | $0.65* | * | * |
| Mutual Fund - Mortgages | $0.27 | $0.27 | $0.29 | $0.32 | $0.30 | * | $1.62 | $0.90 | * | * |
| Teasury Infaltion Protect Secs. | * | * | * | * | * | * | $1.34 | $0.88 | $0.05 | * |
| Mutual Fund - Bank Loan | $0.0 | $0.0 | $0.01 | $0.71 | $1.36 | * | $3.34 | * | * | * |
| Consultants | $2.50 | $2.55 | $2.45 | $2.72 | $2.82 | * | $3.51 | $4.44 | $1.45 | $0.71 |
| Legal Fees | $0.75 | $1.12 | $0.70 | $0.66 | $0.67 | * | $0.10 | * | * | * |
| Foreign Taxes | $40.57 | $25.59 | $39.70 | $37.90 | $24.07 | * | $15.48 | $1.12 | * | * |
| Subsidy to Comptroller | $3.92 | $3.64 | $3.94 | $4.26 | $4.02 | * | 2.11 | * | * | * |
| Miscellaneous | $2.43 | $1.89 | $5.15 | $2.81 | $2.19 | * | $4.51 | $1.57 | $0.60 | $0.12 |
| Total Expenses | $572.3 | $489.90 | $349.22 | $313.23 | $245.67 | * | $231.76 | $175.26 | $46.11 | $37.43 |
| Total Assets (in billions) | $87.93 | $82.43 | $78.53 | $87.08 | $70.25 | * | $55.03 | $35.38 | $35.53 | $42.82 |
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