NYC public employees’ pension to liquidate $1.5 bln hedge fund portfolio

  • NYCERS joins CalPERS in ditching hedge funds
  • Callan finds asset mixes generate adequate returns
  • Unclear how change will affect PE holdings

The New York City Employees’ Retirement System’s board of trustees voted to liquidate its $1.5 billion hedge fund portfolio “as soon as practicable,” according to a copy of the resolution.

The board did not hammer out the specifics of the new asset allocation, but NYCERS consultant Callan presented strategic mixes that could hypothetically generate adequate returns without use of hedge fund investments, according to the resolution.

“Following extensive review, the trustees of the New York City Employees’ Retirement System have chosen an asset allocation mix that moving forward will exclude hedge funds. As discussed today, the trustees believe that this new structure will help the fund construct a responsible portfolio that meets our long-term investment objectives,” City Comptroller Scott Stringer said in a statement.

The decision does not apply to New York City’s other four pension funds. Hedge funds represented less than 3 percent of NYCERS’ $52.2 billion portfolio at year-end, according to a quarterly investment report. The portfolio generated a 2.87 percent return since its inception.

NYCERS joins several major pensions that have reduced their exposure to hedge fund strategies in recent months. In 2014, the California Public Employees’ Retirement System cut hedge funds from its investment allocation. Likewise, theIllinois State Board of Investment slashed its target allocation to hedge funds to 3 percent from 10 percent earlier this year, according to a report by Pensions & Investments.

It’s unclear how NYCERS’ ongoing asset allocation discussions will affect its $4.1 billion private equity portfolio. Last year, New York City hired secondary firm Cogent Partners to sell some of its retirement systems’ private equity fund stakes, Buyouts reported.

Action Item: See NYCERS’ Q4 investment report here: