The chart below is a report card for the investment performance of the NYCERS trustees over the last 14 years. The Comptroller has never presented this type of report. The trustees have never demanded this type of analysis. It is "crystal" clear why neither party does.
The avgerage actual annual rate of return over the last 14 years is 2.11%. No one wants to have to explain this long term sub par performance. It has been a rough 14 years for pension fund investing.
Over the years NYCERS has had a general asset allocation of 70% in stocks and 30% in bonds. With that allocation and using a US stock index fund and a core bond strategy the market would have given NYCERS an average annual rate of return of 3.59% over the last 14 years. This is not anything to write home about but it would have produced an extra $11B over the $47B closing balance that NYCERS had at the end of 2013.
On a side issue, you can see how dangerous the actuary's 8%/7% interest rate assumption is.
The 2000 closing balance, $42.9B, was 99.9% based on market values. In contrast, the 2013 closing balance, $47.2B, is only 85% market based due to the illiquid non-market based components of the current portfolio. The $47.2B includes a $7.2B estimate for private equity, real estate, and hedge fund assets. This estimate is always open to question and raises the very real possibility that the $11B shortfall is even larger.
In conjunction with this rise in illiquid assets NYCERS has shifted out of the the index/core strategy that it previously followed. In 2000, the NYCERS portfolio was 71% invested in an index/core strategy. By 2013 NYCERS had only a 39% position in the index/core strategy.
To be accurate the trustess outperformed the market four times (marked in column 4) over the last 14 years but it was not enough to make up for the damage incurred in the other 10 years.
The last column of the chart lists the investment fees incurred each year. You can see that from 2000 to 2004 these fees were in the range of 10 basis points. Since 2005, the trustees have lost control of these fees. I suspect that the trustees are most likely not aware of the actual fees being paid or the content of the investment contracts they have agreed to.
| Fiscal Year | Close Balance | Net Cash Flow | Actual Rate of Return | Index/Core Return (70%/30%) | S&P/Bond Returns | Index/Core Close Balance | Fees |
| 1999 | $41.9B | $ | % | % | % | $ | $ |
| 2000 | $42.8B | -$412M | 3.14% | 5.52% | 6%/4.47% | $43.8B | $32.5M |
| 2001 | $38.1B | -$558M | -11.86% | -7.58% | -15.8%/11.65%% | $40.0B | $41.3M |
| 2002 | $32.8B | -$1,028M | -11.44% | -10.82% | -19.2%/8.65% | $34.8B | $37.6M |
| 2003 | $31.5B | -$1,511M | 0.62% | 2.36% | -1.5%/11.47% | $34.0B | $29.3M |
| 2004 | $34.2B | -$1,202M | 12.71% | 12.08% | 17.1%/0.43% | $36.8B | $35.1M |
| 2005 | $35.5B | -$756M | 6.30% | 5.56% | 4.4%/8.2% | $38.1B | $53.9M |
| 2006 | $37.3B | -$711M | 7.10% | 4.23% | 6.6%/-1.36% | $39.0B | $69.4M |
| 2007 | $42.5B | $368M | 13.03% | 14.75% | 18.46%/6.33% | $45.2B | $98.1M |
| 2008 | $39.7 | $314M | -7.32% | -8.10% | -14.9%/7.67% | $41.9B | $115.3M |
| 2009 | $31.9B | $313M | -20.46% | -17.50% | -28.2%/7.40% | $35.0B | $138.2M |
| 2010 | $35.4B | $72M | 10.68% | 11.63% | 12.1%10.49% | $39.3B | $175.3M |
| 2011 | $42.4B | $164M | 19.39% | 20.94% | 28.1%/4.15% | $47.8B | $145.1M |
| 2012 | $42.7B | $728M | -1.14% | 5.01% | 3.1%9.35% | $51.0B | $129.5M |
| 2013 | $47.2B | $783M | 8.81% | 12.26% | 17.9%/-0.95% | $58.2B | $183.3M |
2 comments:
What? Really? Seriously? This outrageous conduct is conduct unbecoming a trustee. If the fund only performs 4 out of the last 14years, How can the BOT justify paying $183M.to fund managers and fees,etc. If I were so employed to invest money in this way,I'd be terminated. This writer smells a conflict or two. I think the powers to be should snoop around the family and friends of the trustees. Maybe the DOI and the Conflicts of Interest Board should take a look and see. I bet my whole pension that some of the trustees, are partying in the Hamptons(summer)and Aspen (Winter) with those big, fat butter and eggs executives from wall street.
What? Really? Seriously? This outrageous conduct is conduct unbecoming a trustee. If the fund only performs 4 out of the last 14years, How can the BOT justify paying $183M.to fund managers and fees,etc. If I were so employed to invest money in this way,I'd be terminated. This writer smells a conflict or two. I think the powers to be should snoop around the family and friends of the trustees. Maybe the DOI and the Conflicts of Interest Board should take a look and see. I bet my whole pension that some of the trustees, are partying in the Hamptons(summer)and Aspen (Winter) with those big, fat butter and eggs executives from wall street.
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