2014) — Lawmakers are pushing for New York City Retirement Systems (NYCRS) to
increase its investments in alternative assets and international fixed income,
according to a bill under consideration in the state senate.
legislation, sponsored by bi-partisan Senators John DeFrancisco and Diane
Savino, proposes a bump in exposures to such investments to 35% from 25%,
was in keeping with the evolution of capital markets and in line with the
actions of other large government pension funds,” according to the bill’s memo.
“This limit will allow for a superior risk-adjusted portfolio and for
additional flexibility to reduce portfolio volatility while maintaining
City’s five pension funds have been consistently raising the limit since 1982.
According to the note, the $150 billion system had incrementally increased the
limit from 5% to 25% by 2006, putting the funds in a “better position to manage
The bill stated
that under the current 25% limit the pension funds are unable to invest in
a number of “attractive asset classes and strategies” such as certain
high-yield bonds, international fixed income, and various commodities that
could provide diversification. The problem has become even more pronounced
given current low expected market returns, the bill said.
cited NYCRS’ illiquid, long-term private equity partnerships as an example of
an inadequate investment in today’s market environment.
of these investments is subject to ever-changing market conditions and is
difficult to forecast,” according to the memo. “NYCRS must account for both the
actual value of private equity investments as well as future contractual
commitments to provide capital when measuring compliance with the 25% basket
stated that the legislation would act as a proactive measure against future
market changes and a move towards an optimal investment portfolio.
exposures to 35%, pension advisors and trustees could better “tactically manage
the investments to take advantage of market trends, react to market shocks, and
avoid potentially costly rebalances or unwinds at inopportune times.”
Richard Young, actuary for the New York State Teachers’ Retirement System, the
legislation will not incur any other policy changes. “With respect to the
NYCRS, the enactment of this proposed legislation would not, in and of itself,
result in any change in employer contributions,” he said.
approved by the Civil Service and Pensions Committee, has moved to a third reading
on the Senate floor as of June 2.
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