The New York Times reports this morning that NY City Comptroller Scott Stringer is charging Wall Street with savaging the city's pension fund returns through a system of fees that drained profits over the past decade:
Headlined Wall Street Fees Wipe Out $2.5 Billion in NYC Pension Gains the article reports:
Until now, Mr. Stringer said, the pension funds have reported the performance of many of their investments before taking the fees paid to money managers into account. After factoring in those fees, his staff found that they had dragged the overall returns $2.5 billion below expectations over the last 10 years.
“When you do the math on what we pay Wall Street to actively manage our funds, it’s shocking to realize that fees have not only wiped out any benefit to the funds, but have in fact cost taxpayers billions of dollars in lost returns,” Mr. Stringer said.
With over $160 billion in assets, the funds, the fourth largest in the country, are huge.
Over the last 10 years, the return on ... “public asset classes” (domestic and foreign stocks and bonds) has surpassed expectations by more than $2 billion, according to the comptroller’s analysis. But nearly all of that extra gain — about 97 percent — has been eaten up by management fees, leaving just $40 million for the retirees, it found.
The article said the fee drag on "private asset classes" was equal or bigger and that analysts had a difficult time computing how large those fees were since reports to the city often buried fee charges in footnotes rather than reporting them along with the earnings of the funds.
I suppose all of this is hardly surprising. Over in New Jersey, King Christie rewarded financial industry backers who supported his campaign with lucrative contracts to manage some of the state's pension funds.
In fact, a report indicates the state paid out over $600 million in fees to private pension fund managers in 2014....twice what the state had paid the year before. That ranks NJ among states paying the highest costs for pension management in the nation, the analysts said.
Time for some serious questioning by that noted socialist, Senator Elizabeth Warren.