How Much Private Equity Is Too Much for a Public Pension?

Link: https://www.ai-cio.com/in-focus/shop-talk/how-much-private-equity-is-too-much-for-a-public-pension/

Excerpt:

Pension funds around the U.S. are upping their allocations to private equity after a year of record-breaking returns. According to data obtained from Preqin, the average public pension’s allotment to private equity increased to 8.9% in 2021. In contrast, the average allocation was just 6.5% in 2012.

New York City’s pensions are among those that may see an increased allocation to the asset class in their portfolios should a new law pass. Currently, New York State implements a “basket clause,” which prevents public pensions from investing above 25% of their total portfolios in investments considered higher risk, including real estate, infrastructure, hedge funds, international equities, and private equity. The proposed law would increase that allocation to 35% for all pension funds in the state. If the law passed, the boards of New York City’s five public pensions would vote on whether to increase the “basket” for their own pension funds.

New York City Interim CIO Michael Haddad, who is responsible for overseeing investments in the five pension plans across the city, says that while the change in the law isn’t targeted at private equity exclusively, it’s likely that the asset class would increase.

Author(s): Anna Gordon

Publication Date: 10 May 2022

Publication Site: ai-CIO

New York pension money ‘held hostage’ by Vladimir Putin, Russia

Link: https://nypost.com/2022/05/14/ny-pension-money-held-hostage-by-vladimir-putin-russia/

Excerpt:

New York employees and taxpayers are unwittingly financing Russian companies and the oligarch pals of Vladimir Putin with at least $519 million invested in assets now frozen by the war-mongering dictator, The Post has learned.

City and state pension systems have pledged to sell off the holdings in protest of Russia’s assault on Ukraine, but Moscow has prohibited foreign investors from dumping the stocks.

“Putin is a thug and he’s holding our money hostage,” said Gregory Floyd, a Teamsters union leader and trustee of the New York City Employee Retirement System, NYCERS.

New York City’s five pension systems – covering teachers, cops, firefighters and other city employees – have invested a total $284.5 million in 33 publicly traded Russian stocks, according to records released to The Post by city Comptroller Brad Lander’s office. 

On Feb. 25, the market value of the Russian assets was $185.9 million, nearly $100 million less than the purchase price, the latest available records show.

Author(s): Susan Edelman, Thomas Barrabi

Publication Date: 14 May 2022

Publication Site: NY Post

Opinion: A Slow But Accelerating Crisis—Preserving Affordable Housing for Up to 1.4 Million NYers

Link:https://citylimits.org/2022/02/08/opinion-a-slow-but-accelerating-crisis-preserving-affordable-housing-for-up-to-1-4-million-nyers/

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Excerpt:

The recent op-ed in Crain’s New York Business by former City Comptrollers Jay Goldin and Elizabeth Holtzman (“Affordable housing initiative worked in the past and can work again today”) recalled a city pension fund program, initiated in 1983, that was specifically designed to finance the renovation of deteriorated rental apartment buildings in lower income neighborhoods. Supported by New York State mortgage insurance, the pension investments financed the restoration of a wide range of apartment buildings and worked uniquely well for small buildings with owners of limited resources. Two percent of the pension funds’ assets were committed for long-term, fixed-rate mortgages, with an interest rate priced at the market, with a two-year rate lock while the capital improvements were made.

Recognizing that these buildings would need some public subsidy—and that many owners lacked the experience to deal with complex government processing—a system evolved whereby these investments were coupled with streamlined city subsidy programs. The program’s goal: to restore a building’s physical and economic health while keeping its apartments affordable. 

The pension funds filled a critical gap as most conventional long-term lenders viewed this market as too complicated and too unprofitable. For many years after its inception, the Community Preservation Corporation was the primary user of the program, using its “one-stop-shop” to originate construction loans for predominantly small properties. Upon construction completion, the long-term mortgage was provided by the pension funds. Over time, other banks were approved to originate loans for the funds, with their focus mainly on financing the renovation of larger buildings. 

….

Fourth, the pension funds should recommit to investing up to 2 percent of their assets (now $5 billion) for long-term financing at a market rate, insured by the State Mortgage Insurance Fund. In the long history of the program, the funds have experienced no losses, the state insurance fund covering the few losses that had occurred. 

Efficient implementation can minimize the use of public funds and provide a large pool of fixed-rate, long-term financing for these properties. Doing so is within the purview of the city’s comptroller and the pension fund trustees.

Author(s):Michael D. Lappin

Publication Date: 8 Feb 2022

Publication Site: City Limits

Why Coney Island and Brighton Beach were hit so hard by omicron

Link:https://gothamist.com/news/why-coney-island-and-brighton-beach-were-hit-so-hard-omicron

Excerpt:

The two zip codes encompassing this region — 11224 and 11235 — have experienced 75 deaths per 100,000 people over the last month, a fatality rate nearly three times the citywide average. The pair of zip codes ranked only behind East New York when it came to the pace of COVID deaths between December 24th and January 20th, while their hospitalization rates were also among the highest in the city.

These two zip codes in southern Brooklyn also have lower vaccination coverage than the city as a whole, a common thread between most of the places hit hardest this winter. The area is averaging 66% full vaccination, compared with 75% citywide. In adjacent Gravesend, fewer than two-thirds of residents are fully vaccinated, and meanwhile, some parts of the city are approaching universal coverage.

….

Hospital leaders said undervaccination is having an outsized effect on these oceanside communities because the area’s demographics make residents prone to severe illness from COVID-19. In Brighton Beach and Coney Island, 26% of residents are over the age of 65, compared with about 14% in the borough as a whole. Many of those elderly residents also have underlying health conditions.

….

Citywide, 89% of New Yorkers between ages 65 to 74 are fully vaccinated, but the rate drops to 63% for people older than 85. Municipal data also show coverage varies by region and by other demographics. For instance, just 62% of white seniors in the Bronx are fully vaccinated, and only 65% of Black seniors in Brooklyn.

Author(s): Caroline Lewis

Publication Date: 7 Feb 2022

Publication Site: Gothamist

Original Sin (or Pandora’s Box) and Public Finance and Pensions

Link:https://marypatcampbell.substack.com/p/original-sin-or-pandoras-box-and?justPublished=true

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Excerpt:

The kinds of messages that are welcomed are “innovative” in terms of telling you that you don’t have to do the thing you really don’t want to do (put more money into the pensions, promise less, cut back on many things, tax more, etc.)

Yes! You don’t have to fully-fund pensions!

Absolutely, pension obligation bonds will allow you to do really real arbitrage! Don’t worry about the extra leverage!

For sure, you should be chasing the waterfalls of alternative asset classes! You can get those high returns and not worry about extra risk! Otherwise, you’d have to decrease your discount rate!

Author(s): Mary Pat Campbell

Publication Date: 29 Jan 2022

Publication Site: STUMP at substack

Tiering Up – The Unfinished Business of Public Pension Reform in New York

Link:https://www.empirecenter.org/publications/tieringup/

PDF of report: https://www.empirecenter.org/wp-content/uploads/2021/12/Tiering-Up_FINAL-Copy.pdf

Graphic:

Excerpt:

The Tier 5 and Tier 6 changes combined are saving New York state and local governments outside New York City more than $1 billion this year.

After record-busting investment returns in 2021, most of the state’s public pension plans report they are fully funded—but adjusting for financial risk, their combined unfunded liabilities still total nearly $400 billion.

The traditional defined-benefit pension system remains biased in favor of career and long-term employees, to the disadvantage of those who work shorter government careers.

Author(s): E.J. McMahon

Publication Date: 14 Dec 2021

Publication Site: Empire Center

How Many People in NYC Are At Risk of Losing Their Job Over the Mayor’s Vaccine Mandate?

Link:https://mishtalk.com/economics/how-many-people-in-nyc-are-at-risk-of-losing-their-job-over-the-mayors-vaccine-mandate

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Excerpt:

NYC Vaccination Data shows that at most, 18.3% of New Yorker residents are theoretically impacted, but not all of them work.

….

That is less than half of the population of the city. Factoring in the vaccination rate, about 9% of the entire city is at risk of losing their jobs.

Thus Borelli is wildly off on his percentages.

I am not at all defending mayor de Blasio. Indeed, I heavily blasted him in New York City Mandates Vaccinations, Please Be Ready With Your Vaccine Card.

I am just in search of more accurate numbers.

Author(s): Mike Shedlock

Publication Date: 8 Dec 2021

Publication Site: MishTalk

NYC should bolster rainy-day fund, DiNapoli urges

Link:https://www.bondbuyer.com/news/nyc-should-bolster-rainy-day-fund-dinapoli-urges

Excerpt:

Incoming New York Mayor Eric Adams has already heard calls from watchdog groups to boost New York’s new rainy-day account and fine-tune the policies controlling deposits and withdrawals.

New York’s mechanisms are less defined than other U.S. cities’, state Comptroller Thomas DiNapoli said in a report Wednesday. DiNapoli urged city officials to tap recent changes in state and local laws enabling accumulation and use.

Following voter approval of a charter revision in November 2019 and state legislative signoff, city officials established a rainy-day fund — formally the revenue stabilization fund — in February 2021. That made available $499 million in resources that the city could not use to balance its fiscal 2020 budget.

Author(s): Paul Burton

Publication Date: 10 Nov 101`

Publication Site: Bond Buyer

NYPD unions to pull out of pension fund group, Comptroller Stringer urges them to reconsider

Link: https://www.nydailynews.com/news/politics/new-york-elections-government/ny-nypd-unions-pull-out-pension-fund-group-20210920-472g2q3jn5hr5hk2lhgtgitvia-story.html

Excerpt:

New York City police unions that hold partial control over how their members’ pension money is invested are planning to pull out of a consortium of other city pension funds that Comptroller Scott Stringer has credited with considerably augmenting their return on investment.

In 2015, Stringer launched what’s come to be known as the Common Investment Meeting, where the trustees of the city’s five largest union pension funds meet to hash out how their money is managed.

…..

According to Stringer, the CIM has boosted the pension funds’ growth overall, with their rate of return hitting 11.58% over the five years since the CIM was created, compared to a 7.02% rate of return for the five years prior to its creation.

The police pension funds’ trustees are made up of several police unions. The most powerful among them is the Police Benevolent Association.

The PBA’s head, Patrick Lynch, pointed out that the CIM began as a pilot program and disputed the idea that, over the past five years, it’s made life easier for the funds’ trustees.

Author(s): Michael Gartland

Publication Date: 19 Sept 2021

Publication Site: NY Daily News

As Comptroller, Lander Would Use ‘Environmental, Social and Governance’ Factors to Inform Pension Investment

Link: https://www.gothamgazette.com/city/10773-comptroller-lander-environmental-social-governance-esg-pension-investment?mc_cid=234d7207fb&mc_eid=1a5d3a1f3d

Excerpt:

The New York City Comptroller is an investment advisor and fiduciary for New York City’s $266 billion public pension system that serves 700,000 current and former teachers, firefighters, health care workers, police officers, and other retired city employees.

Brad Lander, the Democratic nominee for Comptroller, is all but certain to win the general election this fall in the overwhelmingly Democratic city after prevailing in a competitive primary earlier this year. If successful, Lander would be inaugurated in January and soon be able to make recommendations to the Boards of Trustees of the city’s five public pension funds on how their many billions should be invested, while also voting directly on four of the five pension boards, making him the key figure in almost all investment decisions.

The implications are significant given that city workers’ pensions are on the line, and because the city guarantees those pensions, billions are spent each year to make up for what the pensions themselves don’t produce in returns. Better returns from pension fund investments can save city government a significant amount of money that could be used for other priorities or put aside for a crisis.

Those investment decisions can also be made to further other goals than simply the funds’ bottom lines, though the returns and overall financial health of the pension funds are the comptroller’s main city charter-mandated responsibility.

Author(s): Carmen Vintro

Publication Date: 17 Sept 2021

Publication Site: Gotham Gazette

The New York City Unions Whose Backdoor Deal Sold Out Retirees, Helped Insurance Industry

Link: https://www.newsweek.com/new-york-city-unions-whose-backdoor-deal-sold-out-retirees-helped-insurance-industry-1604661

Excerpt:

In recent years, leadership of some of the nation’s largest unions have publicly opposed single-payer health care proposals, angering their rank-and-file and forcing Democratic politicians who back single-payer to take on a key constituency.

In New York City, for example, the umbrella organization for the city’s public sector unions—the Municipal Labor Committee (MLC)—recently helped the health insurance industry block a statewide single-payer bill, on the grounds that their members wanted to keep the health care benefits for which they had sacrificed wage increases.

But it turns out that the MLC, which bargains for health care benefits for city unions, was also engaging in backdoor negotiations with the city, resulting in a proposal to switch nearly a quarter-million people from Medicare to privately administered Medicare Advantage plans.

…..

Following the 2018 cost-cutting agreement, union leaders and officials came up with eight proposals to meet the cost-cutting requirements, including switching to a statewide single-payer system or setting up a self-insurance system.

A January 2021 study by The New School found that the city could save about $1.6 billion per year if it adopted a self-insurance program, as most major cities and large companies have done. That would involve setting up a health insurance plan just for the city’s employees and paying for claims directly, rather than paying premiums to a health insurance company which tends to be more expensive because insurance company profit margins are so large.

But since the negotiations between the MLC and Office of Labor Relations were held behind closed doors, retirees don’t know whether this option was ever considered.

Author(s): JULIA ROCK, THE DAILY POSTER

Publication Date: 28 June 2021

Publication Site: Newsweek

MTA scare highlights public finance cyber woes

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202106070952SM______BNDBUYER_00000179-d86e-df56-a3fd-f8fe8d120001_110.1

Excerpt:

Subway safety in New York took on a new meaning when the Metropolitan Transportation Authority acknowleged a cyber intrusion, which set off loud alarm bells about the rising threat of system hacks.

The MTA is one of the largest municipal issuers and reports linked China’s government to the episode.

Despite MTA officials? assurances of quick troubleshooting and no evidence of compromise to its operational systems, employee or customer information, this marked the latest chilling cybersecurity event for public finance.

Author(s): Paul Burton

Publication Date: 7 June 2021

Publication Site: Fidelity Fixed Income