The five New York city pension funds, managing almost $160bn, appear to have just noticed quite how much they pay in fees to money managers, and the number of elderly teachers, fire fighters, police and civil servants that money might help support.
The New York Times reports the funds paid more than $2bn over the last 10 years, and got little in return, according to city Comptroller Scott Stringer:
“We asked a simple question: Are we getting value for the fees we’re paying to Wall Street?” Mr. Stringer said. “The answer, based on this 10-year analysis, is no.”
Remember how pension deficits were huge and insurmountable? Not so much, any more.
On its way to posing the question, will they be buyers of bonds?, JPMorgan‘s Flows & Liquidity team notes that the funding chasm is now more of a crack:
The funding gap of the 100 largest US corporate defined benefit pension plans peaked in July 2012 at -$546bn and had declined to -$140bn at the end of January. The deficit of UK defined benefit plans peaked at -£293bn in July 2012 and had declined to a low of -£28bn in December.
We could have sworn we were told that paying high-fee alternative asset managers was the only way pension funds stood a chance of meeting their liabilities, but it looks like stocks and moderately higher rates have put in the hard yards instead. Read more
From the WSJ on Wednesday afternoon, provisional details of Illinois’ delayed $3.7bn pension bond sale:
Initial indications on the deal Tuesday showed $6.1 billion in orders, with around a fifth of those coming from international investors, such as sovereign-wealth funds and insurance companies, one market participant said. Read more