Firms that manage the city’s five pension funds saw their fees skyrocket by 28 percent last year, a report has found.
The $100 million single-year leap brought the city’s total fees to the private managers in fiscal year 2013 to $472.5 million.
The office of Comptroller John Liu, which oversees the $144 billion pension funds and issued the annual report, attributed the increase to the city’s attempt to diversify its holdings.
Three of the five pension funds invested in hedge funds, which come with larger management fees, while new investments in real estate also produced higher costs, officials said.
“Fees rose in FY 2013 consistent with the recent expansion into alternative asset classes that diversify the portfolio against events like the stock-market collapse in 2008,” said Liu spokesman Matthew Sweeney.
“We constantly work to reduce fees across all asset classes, including shedding poorly performing managers, moving public market funds into indexes, and negotiating lower fees in alternatives.”
Over the fiscal year, the value of the city’s pension funds rose by 12.1 percent, from $122 billion to $137 million as of June 2013.
The city’s funds hit $144 billion in September.
The rise in management fees was first reported by Bloomberg News.
Liu’s successor, Scott Stringer, said he plans to take a “hard look” at how much the outside pension managers are getting paid.
“He believes we need to limit costs, ensure payments are commensurate with performance and leverage our size and relationships with other pension funds to negotiate lower fees,” said a Stringer spokesman.
“He plans to — with other major public pension funds around the country and the world, as well as other institutional investors — to identify strategies and common principles with which to negotiate for systematically and reasonably lower manager fees that are sufficiently justified by overall risk-adjusted performance.”
New York City is one of the few large cities in the country without internal pension-fund managers.