NYC Pension Weighs Liquidating $1.5 Billion Hedge Fund Portfolio

  • D.E. Shaw and Brevan Howard among managers that may be fired
  • NYC civil employees' pension has $154.4 billion of assets

New York City’s pension fund for civil employees is weighing exiting its $1.5 billion portfolio of hedge fund investments because of lagging performance, high fees and the riskiness of the asset class.

A vote to terminate the funds, which include D.E. Shaw & Co., Brevan Howard Asset Management, and Perry Capital, will come as soon as Thursday, according to a person familiar with the matter. Hedge funds make up 3 percent of the civil employees’ fund’s $51 billion portfolio.  

“Hedge funds are charging exorbitant fees for high-risk and opaque investments” said New York City Public Advocate Tish James. ”Our public employees work hard for their money, and they deserve to know their investments are secure. We can and must invest responsibly and also honor our fiduciary responsibility.”

New York City may follow a September 2014 move by the California Public Employees’ Retirement System, the largest U.S. pension. Calpers divested its $4 billion portfolio saying the asset class was too expensive and complex.

Negative Return

New York City’s Employees Retirement System, whose members include sanitation workers, librarians and nurses, is one of five New York City public employee pensions. The funds had combined assets of $154.4 billion as of Jan. 31. NYCERS board is made up of trustees representing the mayor, comptroller, public advocate, five borough presidents and three unions.

Last year, NYCERS hedge fund portfolio lost 1.88 percent, lagging both the Standard & Poor’s 500 the Barclays U.S. Aggregate Bond Index. Three-year returns were 2.83 percent.

Eric Sumberg, a spokesman for New York City Comptroller Scott Stringer, didn’t immediately respond to a request for comment.

Hedge funds still manage money for New York City’s pensions for firefighters and police officers. The city’s teachers’ and education administrators don’t invest with hedge funds.

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