New Jersey Pensions to Scrutinize Fees

Despite “excellent” performance, trustees want greater transparency on how much they are paying.

Two of New Jersey’s public pensions are to review the amount of money they paid to fund managers in the past three years.

The trustee boards of the $27.8 billion Public Employees’ Retirement System (PERS) and $23.9 billion Police and Firemen’s Retirement System (PFRS) both demanded detailed breakdowns of the fees paid in 2012, 2013, and 2014, at meetings this week.

“A motion was passed to request a forensic audit of the fees charged to the pension funds for fiscal years 2012, 2013 and 2014.”In total, the New Jersey State Investment Council paid out $615.9 million in annual and performance fees to external managers, as well as incurring $19.6 million in broker/dealer costs relating to its internal management arrangements.

The trustees’ votes follow data released by New York City Comptroller Scott Stringer last week, showing most of the investment gains achieved by the city’s five pension funds were wiped out by high fees.

“A motion was passed to request a forensic audit of the fees charged to the pension funds related to the investment of funds for fiscal years 2012, 2013 and 2014,” PERS’ meeting minutes stated.

PERS and PFRS are among seven pensions run by the New Jersey State Investment Council, which oversees $89 billion in total assets. Three-quarters of assets are run in-house.

The council’s latest annual report showed it paid out $281.1 million in investment-related expenses in the 12 months to the end of June 2014—a period in which the system achieved an overall return of 16.9%. In addition, the system paid a total of $334.8 million in performance fees. However, costs are not broken down by individual pension funds.

As of June 30 2013, PERS was 63% funded on an actuarial basis, while PFRS was 72.7% funded.

The trustees have also requested independent actuaries to look into the effect on the funds if they were to be frozen and employee contributions shifted to an alternative arrangement.

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