Check those numbers. They could be bogus
New York City Comptroller John Liu has been accused of inflating returns on pension investments.
A former pension chief in New York City is claiming that City Comptroller John Liu’s pension-investment strategy resulted in nearly $2 billion in lost earnings in the last fiscal year.
Liu claimed he made 12.1 percent return on investments in fiscal year 2013. The city’s five pension funds (allegedly) grew from $111.3 billion to $124.8 billion.
But John Murphy, the former executive director of NYCERS, the city’s largest pension system, said those numbers have been inflated by adding cash-flow unrelated to investments into the equation. The true rate of return is 10.5 percent, Murphy says. That’s less than the 12.2 percent the city could have earned — another $1.9 billion — if it invested the money in reliable, low-cost S&P 500 Index and Core Bond funds and avoided risky, expensive hedge funds, private equity and real-estate investments.
“They’ve put their money in the wrong places and are paying a lot for it, too,” Murphy told The New York Post. “They could have earned much more if they invested it more carefully.”
With nearly 12 percent of the city’s pension funds invested in riskier “alternative assets,” management fees ballooned to $472.5 million, Liu revealed last month. Those managers typically charge 2 percent of the funds invested plus 20 percent of profits.
In contrast, fees for traditional stocks and bonds are minimal. For instance, Blackrock managed $4.1 billion for NYCERS, the city’s largest pension fund, in the Russell 3000 Index, charging $184,000 in fees, or .004 percent. But in a shift to exotic funds, NYCERS has moved money out of stock indexes and core bonds, dropping from 71 percent in 2000 to 39 percent last year.
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