New York City’s Retirement System Pulls Out of Hedge Funds

After months of urging by District Council 37 and others, the New York City Employees’ Retirement System (NYCERS) voted today to pull its hedge fund investments, now totaling more than $1.4 billion.

DC 37 Executive Director and NYCERS trustee Henry Garrido introduced the resolution to divest, noting the funds charge enormous fees for high-risk investments yet yield tepid results.

“As stewards of the retirement security of public employees of modest means, our role is not to facilitate luxury purchases for high-rolling hedge fund managers,” Garrido said.

“It is incumbent upon the trustees to ensure that the pension funds are invested securely and responsibly. Today, we took a necessary step to do just that.”

The NYCERS vote follows similar actions to pull hedge fund investments by pension funds in California and Illinois.

An American Federation of Teachers analysis of 11 public pension plans, including New York City’s, found the funds are paid an average of $81 million in annual fees. “The report also found that for each of the pension plans, the portion of their portfolio invested in hedge funds fared worse than the portions of their investments not invested in hedge funds,” The Wall Street Journal reported.

The NYCERS board of trustees has eleven members, including Garrido; a representative of Mayor Bill de Blasio; City Comptroller Scott Stringer; Public Advocate Letitia James; the five borough presidents, and two other union leaders.

Hedge funds are under fire for their self-interested practices and tactics.

Hedge fund managers, for example, want public service workers and the poor to assume the burden of the debt crisis in Puerto Rico. Hedge funds, which hold $5.2 billion in Puerto Rico bonds, have called for austerity policies resulting in layoffs of public employees, an erosion of public services, school closings and higher prices for essentials such as gasoline, electricity and water.

NYCERS is one of New York City’s five public employee retirement systems. In January, the funds had combined assets of $154.4 billion. The other four pension funds, representing teachers, police, firefighters and the Board of Education, have been undergoing a review of their asset allocation, according to the Journal.

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