New York City's five public employee pension funds achieved a 17.4% investment return for fiscal 2014 to bring their total fund value to a record-high $160.5 billion, Comptroller Scott Stringer announced.
"Five years of positive returns are good news for the pension funds and for the city," Stringer said. "The city will benefit significantly from the savings generated by these investment returns. Any year in which the pension funds achieve double the assumed rate of return is a good one in my book."
Fiscal 2014 marks one of the strongest years of returns in the last five years for the pension funds, said Stringer, and follows investment returns of 12.1%, 1.4%, 23.2% and 14.2%. Over the past five years, the funds have an annualized rate of return of 13.4% with a 10-year annualized return of 7.59%. The funds now have an actuarial assumed rate of return of 7%.
Chief Investment Officer Scott Evans cited the investment environment, strong growth in equities and a diversified investment strategy. Evans began on the job in late May after 27 years with TIAA-CREF.
Stringer said the latest returns will lower the city's pension contributions beginning in fiscal 2016, resulting in cumulative city savings of $17.8 billion phased in over six years, with each year's incremental savings repeated for 15 years. The city's budget projection of its pension contributions assumes pension returns beyond fiscal 2013 to equal the statutory actuarial interest rate of 7%.
The city's pension contributions from fiscal 2016 through 2021, according to Stringer, will drop by $178 million, $356 million, $534 million, $712 million, $949 million and $1.2 billion and will continue that annual level through 2030 and taper down to $237 million in 2035.
According to Stringer, the funds' five-year performance as of March — the most recent data available — placed in the first quartile in the Trust Universe Comparison Service comparative performance rankings, up from the third quartile in December 2009. The funds' 10-year TUCS ranking increased from the fourth quartile in December 2009 to the second quartile as of March 4. TUCS metrics for the end of the fiscal year will not be available until fall.
Stringer, a former Manhattan borough president and state assemblyman, serves as the investment advisor, custodian and trustee of the pension funds. They are the New York City Employees' Retirement System, Teachers' Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund, and the Board of Education Retirement System.
Each pension fund is financially independent of the others, and has its own board of trustees.
The trustees of all five funds voted earlier this year to ban placement agents across all investment classes, an initiative Stringer announced in February. Previously, city pension funds only prohibited such placement agents for private equity investments.
Stringer called for such a ban as part of a six-point overhaul for operations within the Bureau of Asset Management, which operates within the comptroller's office.
Moody's Investors Service rates the city's general obligation bonds Aa2. Fitch Ratings and Standard & Poor's rate them AA.
