Business

NYC’s pension funds lag peers in private equity returns

New York City’s public pension funds fall near the back of the pack when it comes to private equity investments performance — a key area as they chase market-beating returns.

The city’s four biggest funds, including those for teachers, firefighters and cops, lagged their peers in a Post analysis of the 50 “most active” city and state public pension private equity investors.

The worst performers — the New York City Employees’ Retirement System and the New York City Teachers’ Retirement System — tied for 45th place. The police pension fund, in 42nd place, and the firefighters fund, 37th, didn’t fare much better when it came to picking private equity firms, according to the analysis by Bison, a Boston analytics firm focused on the private markets.

“They have scores that put them closer to the bottom of that list than to the top,” Bison research manager Michael Roth said. “Fund selection could be better.”

Bison ranked the 50 pensions based on how the PE funds they invested performed relative to other funds raised that same year.

NYC had $17.9 billion, or 11.5 percent, of its five pension funds’ assets committed to PE funds at the end of 2013.

Many public pensions, struggling to meet their obligations to retirees, are plowing more money into riskier investments like private equity firms in hopes of plugging the hole.

The New York City Employees’ Retirement System had funded only 66 percent of its obligations as of June 30, 2012. The police pension was at 64 percent, the teacher pension at 58 percent, and the firefighters at 52 percent.

The city’s five pensions, including the New York City Board of Education Retirement System, have a combined 715,301 members.

New York City Comptroller Scott Stringer has tasked his new chief investment officer, Scott Evans, who started this week, with figuring out how to boost the pension funds’ private equity portfolio.

“While we are concerned about long-term return in private equity, we have reason to be encouraged by the relative returns of our private equity portfolio in recent years,” a spokesman for the comptroller’s office said.

For the Massachusetts state pension, which ranks 6th, every $100 invested in private equity 10 years ago generated a 17.7 percent annual return and is now worth $512. The same investment in the five NYC pensions, which combined generated a 12.4 percent return, is worth $322.

Industry sources blame the city’s byzantine system under former New York City Comptroller Bill Thompson, who oversaw many of the pensions’ private equity investments from 2002 to 2009.

“The city was a hard place for private equity firms to navigate,” a placement agent said, adding that firms with the best records didn’t bother dealing with the city.