Yesterday, Comptroller Scott M. Stringer, who oversees hundreds of billions of dollars for NYC's pension funds, released a press release critical of Wall Street's fees.
In it, he decided to use a 10-year cost summarization, an age-old scare tactic, noting: "The analysis concluded that, over the past 10 years, the five pension funds have paid more than $2 billion in fees to money managers and have received virtually nothing in return, Comptroller Scott M. Stringer said in an interview on Wednesday."
Then, he literally admitted the following:
"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."
Yet:
Over the last 10 years, the return on those "public asset classes" 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.
So, in other words, Mr. Stringer appears to believe that his investments should be privy to more of the outperformance rather than fees paid to outperform.
As Matt Levine points out, this is quite a silly game he seems to be playing (that is, criticizing his own investment strategy):
http://www.bloombergview.com/articles/2015-04-09/new-york-discovers-wall-street-charges-fees
If he admits that his strategy was a poor one to use, hasn't he opened to the door to the following two questions:
1) Why did Mr. Stringer wait 10 years to conduct this analysis? Is this lackadaisical approach a breach of fiduciary duty?
2) If Mr. Stringer realized that his allocation and strategy was not ideal for the NYC pension funds, why should they continue to keep him in charge of this money?
In it, he decided to use a 10-year cost summarization, an age-old scare tactic, noting: "The analysis concluded that, over the past 10 years, the five pension funds have paid more than $2 billion in fees to money managers and have received virtually nothing in return, Comptroller Scott M. Stringer said in an interview on Wednesday."
Then, he literally admitted the following:
"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."
Yet:
Over the last 10 years, the return on those "public asset classes" 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.
So, in other words, Mr. Stringer appears to believe that his investments should be privy to more of the outperformance rather than fees paid to outperform.
As Matt Levine points out, this is quite a silly game he seems to be playing (that is, criticizing his own investment strategy):
http://www.bloombergview.com/articles/2015-04-09/new-york-discovers-wall-street-charges-fees
If he admits that his strategy was a poor one to use, hasn't he opened to the door to the following two questions:
1) Why did Mr. Stringer wait 10 years to conduct this analysis? Is this lackadaisical approach a breach of fiduciary duty?
2) If Mr. Stringer realized that his allocation and strategy was not ideal for the NYC pension funds, why should they continue to keep him in charge of this money?