Tuesday’s announcement that he will support a divestiture from coal is the latest push by New York City Comptroller Scott Stringer for change in the city’s $163 billion system of five primary pension funds.
“I can tell you that my vote will be to divest,” Stringer said at a Citizens Budget Commission breakfast at the Harvard Club of New York. While Stringer acknowledged that pension holdings in coal are fractional -- less than $33 million -- “it’s not just the smart thing to do, but the right thing to do.”
Stringer and Mayor Bill de Blasio are collaborating on the initiative, which has the backing of environmental groups and several city council members.
Stringer, halfway into his first four-year term as comptroller, said a myriad of governance problems including failure to address climate change, lack of diversity, and excessive pay for chief executives, put the pension funds at risk. Since his election in 2013, Stringer has launched several moves designed to make the pension system more transparent, including a series of ethics controls and internal safeguards such as banning placement agents.
Addressing pension system opaqueness has consumed much of his time as comptroller, Stringer admitted in an interview after his speech.
“It’s been a major focus that I didn’t expect,” he said. “We have more work to do, a lot of room for further reform.”
On Wednesday, Stringer will convene the inaugural common investment meeting among the pension funds, bringing all five funds to the same table for the first time and reducing the number of meetings annually from 54 to six.
“Now, instead of sitting in the same meetings five times over, [Bureau of Asset Management] staff are having face-to-face meetings with investment managers,” said Stringer.
The primary pension funds are the New York City Employees’ Retirement System; Teachers’ Retirement System of the City of New York; New York City Police Pension Fund Subchapter 2; New York City Fire Department Pension Fund Subchapter Two; and the New York City Board of Education Retirement System.
Each fund is financially independent and has its own trustees. Stringer has a vote on four of the five boards.
While some critics have called for merging all five of these funds, Stringer believes in what he called a “steady drumbeat to reform” through consensus building.
Four years ago, Michael Bloomberg and John Liu, the mayor and comptroller at the time, called for merging the five. That never gained traction.
“The Liu-Bloomberg plan, when that was put forth, had a lot in it that I support, but the reality was that it was dead on arrival and it wasn’t going to pass master and by extension, it wasn’t going to pass in Albany,” said Stringer. “So we had to do things much differently.”
Howard Cure, director of municipal bond research for Evercore Wealth Management, sees some efficiencies through the common meetings, though little change overall.
“All of the different boards meeting at different times is unwieldy and sort of Byzantine,” said Cure. “It might give the appearance of being more efficient without cutting into the power of the pension boards. You could have more economies of scale, but I don’t see huge changes because of it.”
Merging the boards themselves would require approval by the state legislature in Albany. “That speaks to the fact that the city in many respects is a ward of the state,” said Cure.
The funds returned 3.4% gross, and 3.15% net of fees for fiscal 2015, Stringer said in October.
Stringer said he and his staff would “go toe to toe with Wall Street” and negotiate better deals on fees. Earlier this year, his office reported that for private asset classes, money managers fell more than $2.5 billion short of their benchmarks after fees over the last decade because huge management fees swallowed 95% of the value they generated.
Last month, Stringer’s office disclosed that an additional $178 million in fees were buried in small print.
He repeated his call for diversity on corporate boards. “Part of the problem is group-think,” he said. “If everyone looks the same, goes to the same schools, has the same view of the world and hangs out at the same clubs, they’re likely to make the same mistakes.”
