Every year, pension funds in New York and New Jersey spend hundreds of millions of dollars in fees to Wall Street managers in charge of investing their assets.
The fees themselves are fairly standard for what the industry charges. But in New Jersey, the price tag has climbed dramatically as the state increasingly invests in alternative assets like private equity, real estate and hedge funds — prompting concerns from labor leaders and lawmakers about lost revenue and the role politics can play in investment decisions.
Meanwhile, New York City Comptroller Scott Stringer says the city isn't getting enough return on its investments to justify the fees it's paying and is calling for change.
Here's a snapshot of what New York and New Jersey's pension funds are paying, and what they're getting in return.
New York City
Total Pension Assets: $160 billion
Funded Ratio: Police 74%, Fire 64%, Teachers 72%, Board of Education 79%, other Public Employees (NYCERS): 75%
Assumed Rate of Return: 7%
Actual Return 2014: 17.5%
Alternative Asset Allocation: 12%*
Total Fees: $521 million
Source: Comprehensive Annual Financial Report of the Comptroller: Fiscal Year 2014
*From New York City Comptroller
New York State
Total New York State Pension Assets: $181 billion
Funded Ratio: Police and Fire (PFRS) 89.5 %, other public employees (ERS) 88.5 %,
Assumed Rate of Return: 7.5%
Actual Return 2014: 13%
Alternative Asset Allocation: 20%
Total Fees: $575 million
New Jersey
Total New Jersey Pension Assets: $81 billion
Unfunded Liability: $83 billion*
Funded Ratio: 49%
Assumed Rate of Return: 7.9%
Actual Return 2014: 16.9%
Alternative Investments: 28.2%
Total Fees: $601 million ($267 million in fees + $334.8 million for performance allocation)
Source: New Jersey State Investment Council Annual Report: Fiscal Year 2014
* From the New Jersey Department of The Treasury