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City to Pull $1.5 Billion in Pension Money From Hedge Funds, Officials Say

By Ben Fractenberg | April 14, 2016 3:25pm
 One of the city's pension funds voted Thursday to pull $1.5 billion in investments for Hedge Funds.
One of the city's pension funds voted Thursday to pull $1.5 billion in investments for Hedge Funds.
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MIDTOWN — The city’s largest civil employee pension fund voted Thursday to pull all its investment — $1.5 billion — from hedge funds due to high risk and high fees, according to officials.

The board of trustees for the New York City Employees' Retirement System (NYCERS) fund — which includes Comptroller Scott Stringer, Public Advocate Letitia James and all the borough presidents — passed the resolution on April 14 to liquidate the investments “as soon as practicable” from the potentially high-earning, yet risky, funds, according to the agreement.

"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,” the comptroller said in a statement. “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.”

The hedge funds include D.E. Shaw & Co. and Brevan Howard Asset Management.

The public advocate said the city should invest in more “responsible” and “secure” assets.

“Hedge funds are charging exorbitant fees for high-risk and opaque investments,” James said in a statement. “Our public employees work hard for their money, and they deserve to know their investments are secure. We can and must invest responsibly and also honor our fiduciary responsibility.”

Mayor Bill de Blasio also set aside $600 million in the 2017 budget to help meet the city’s pension obligations. 

"Our votes are based on our fiduciary responsibility to members," said mayoral spokeswoman Amy Spitalnick in an email. "Analysis shows that our pension funds have not seen better risk-adjusted returns despite the high cost of management fees in portfolios that include hedge funds."

NYCERS is the largest of the city’s five pension funds. There are also separate pensions for police, firefighters and teachers.

The pension was started in 1920 and currently covers 300,000 workers and retirees, according to the NYCERS website

The hedge funds did not return an immediate request for comment.