(February 20, 2013) — There’s a bright side and a negative side when it comes to a review of the New York State Common Retirement Fund (CRF) by Funston Advisory Services.
The basic conclusion of the review? “Despite their lack of resources, they’re doing a good job,” Rick Funston, managing partner of Funston Advisory Services, told aiCIO.
The review, required as part of robust oversight reforms pushed by New York State Comptroller Thomas DiNapoli, found that the fund is “thinly staffed,” relying more on consultants than its peers. “While these issues have not prevented the fund from managing the existing investment program effectively, it has slowed development and implementation of new strategies,” the report said.
Issues related to pay-to-play haven’t helped the fund either, the study concluded. “In response, the CRF underwent a series of regulatory and leadership changes which resulted in interim positions and vacancies in the CIO and other key positions. The effects of these crises, combined with the resultant changes in leadership, and lack of investment staff in asset classes targeted for growth, have slowed the CRF’s progress towards achieving its 2009 target asset allocation plan,” according to the report.
On the bright side: the fund is well-run, operates with an industry-leading level of transparency, and invests effectively on behalf of its members.
“Funston’s independent analysis confirms that the New York State Common Retirement Fund is a leader among public pension funds in this country and is setting a standard for transparency and ethics,” DiNapoli said following the report. “Since becoming comptroller, I have improved policies and procedures, strengthened internal controls and standards, and increased public disclosure. This review is a validation that we are on the right path and should reassure the people of New York the Fund is being managed properly and ethically.”
The Funston firm conducted the review for the three fiscal years ended March 31, 2012, as state law requires a fiduciary and conflict of interest review of the fund triennially. To complete its review, Funston examined 1,700 documents, conducted dozens of interviews with staff and external advisors, worked with an expert benchmarking firm and utilized an advisory team of well-respected financial experts to review the final product. Funston was selected through a competitive process, CRF outlined on its website.