Learnings From NYC Pension Fund’s Annual Conference

The annual conference for investment managers for the NYC pension fund was held on Friday, May 1, 2105. The primary purpose of the conference was to introduce the NYC pension fund to prospective fund manager clients. The New York City Comptroller, Scott Stringer, started the morning by communicating the importance of transparency and diversity to the success of the NYC pension fund. The leadership team hammered home how the integrity of their employees and clients was key to driving positive results.

Following Stringer’s keynote was Scott Evans, the deputy comptroller for asset management and chief investment officer. Each head of the different asset classes including private equity, fixed income, public equity, hedge funds, real estate, and infrastructure spoke about their particular strategy and future goals.

The conference was meant to educate fund managers on the criteria and process of potentially winning business with the NYC pension fund. This year’s conference theme was diversity. Stringer has mandated that the fund will allocate more capital to minority and women-owned funds. This thesis is centered on the belief that hiring more minorities and women will promote diversity in thought. This strategy will not be treated as a handout or a sacrifice in quality just to promote diversity. It was made clear that finding and producing quality work is the first and foremost goal, regardless of diversity traits. However, if the quality is the same between two clients, the fund will seriously consider hiring the minority manager. Diversity in thought processes and backgrounds will better serve to make the fund more productive, thereby providing the fund’s beneficiaries, the 700k plus NYC workers, with enhanced returns.

 

Some Interesting Facts About the NYC Pension Fund:

Stringer appointed a chief diversity officer, Carra Wallace, for the first time in the NYC Comptroller’s office history. The fund is the 5th largest pension system in the US at $159.2Bn as of the end of 2014. It comprises of 36.8% US Equity, 30.5% Fixed Income, 17.3% International Equity, 6.2% Private Equity, 3.7% Real Assets, 3.3% Cash, and 2.2% in Hedge Funds.

Of particular interest is the fund’s alternative asset allocations. The NYC fund has a rule that it cannot allocate more than a certain percentage in alternative assets. The logic behind this is likely the need to maintain a certain level of liquidity and control risk. The goal is to add to each alternative asset class, including $125M to hedge fund investments and $240M in private real estate.

The selection process is meant to be highly selective with a focus on transparent operations. The fund recently banned working with placement agents, which is a direct response to requiring more transparency. Hedge fund allocations at $3.5Bn are represented by 35% relative value strategies, 28% tactical, 15% fund of funds, and 21% event driven. PE represents $10Bn in investments mostly in buyout strategies at 58%, growth at 10% and other strategies representing the rest of the allocations. It was explained that manager relationships change often, and that performance trumps blind loyalty. The head of Private Equity, Alex Done, made it especially clear that he had an open door policy and takes every manager meeting. The diligence and eventual onboarding process is to identify the universe of quality managers, perform due diligence in a follow up meeting, perform deep dive and eventually recommend investment for approval by the investment committee and board.

The conference was generally interesting and informative. It does seem that the fund genuinely cares about the things it can control – who it hires, with whom it conducts business, and making trustees as much money as possible in a responsible way. This mandate is a good development for emerging managers who are trying to secure institutional capital. While competition will be fierce, quality emerging managers will have an opportunity to elevate their businesses to the next level.

 

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  • Seonaid Mackenzie

    Women and Minority owned investment managers does any one know any pension funds looking