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New York Pension Trustees Call for Alternative Management Plan

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Jan. 20 (Bloomberg) -- New York City pension trustees representing senior police and fire officers proposed an alternative that would preserve their power over how the city invests retirement funds, according to a copy of the plan.

Mayor Michael Bloomberg and Comptroller John Liu advocate an independent investment board composed of representatives of the mayor, comptroller and unions that would set pension strategy and hire managers. They said the combined board and a chief investment officer, a new post, would lower costs and depoliticize management of funds with $115.2 billion in assets.

Trustees representing the officers don’t want to delegate investment authority to a new board. Instead, they’re proposing that the funds’ more than 50 trustees continue to set strategy at monthly meeting and hire investment managers.

Unlike the plan backed by Bloomberg and Liu, the counterproposal would leave the comptroller in charge of the chief investment officer.

Roy Richter, president of the Captain’s Endowment Association, presented the plan to a group of pension-fund trustees in a meeting yesterday. He declined to comment when reached by telephone.

“There shall be no reduction, elimination or minimization of the authority and fiduciary responsibility of current trustees of the five pension funds in the New York City Pension System,” according to the proposal from the New York City Police-Fire Superior Officers Alliance.

Bloomberg News obtained the document from a person involved in the discussions who declined to be identified because the meeting was private.

Spin Off

The superior officers also oppose the city’s plan to spin off the Asset Management Bureau, now under the comptroller, into a separate investment-management group under the independent board.

New York’s pension funds for teachers, police officers, firefighters, civil employees and school administrators each have their own boards, consultants and investment policies. Liu, who’s elected, serves as investment adviser to the funds. Representatives of the comptroller and mayor also are trustees.

Marc LaVorgna, a spokesman for Bloomberg, said he hadn’t seen the proposal and declined to comment further. Michael Loughran, a spokesman for Liu, also said he hadn’t seen it.

“The current investment reform proposal will depoliticize the investment process, benefit the city’s pensioners and taxpayers and modernize a system that has operated the same way for 70 years,” Loughran said in an e-mail.

Management Merger

When Bloomberg, an independent, and Liu, a Democrat, announced an “agreement in principle” to merge investment management in October, they were joined by leaders of the police, fire, teachers and civilian employees unions.

New York City’s retirement costs have increased more than fivefold to $8.5 billion this year from $1.5 billion in 2002, when Bloomberg took office, representing almost 13 percent of the $66 billion budget for the current fiscal year. The pension funds had $395.7 million in investment expenses in fiscal 2011, according to New York’s annual financial report.

Boosting returns and lowering investment costs would allow the city to spend more on services, Bloomberg and Liu said in October.

The invested pension assets returned about 23 percent in the fiscal year ended June 30, according to the comptroller’s office.

The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.

To contact the reporters on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net; Cristina Alesci in New York at Calesci2@bloomberg.net;

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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