DiNapoli, the sole trustee of the $153.9-billion New York State Common Retirement Fund, told reporters that the fund needs more flexibility to go after higher-return alternative investments such as private equity, real estate, and absolute return strategies. Lawmakers increased the alternative investment limit from 15% to 25% in 2006.
DiNapoli said he could not yet suggest the amount by which the cap on alternative investments should be increased, but he would not be asking for carte blanche. “I have not finalized what our proposal would be,” he said. “Obviously we’re not going to look for the freedom to do whatever we want.”
DiNapoli also announced that he will be launching a strategic asset allocation review in 2009 to re-examine the long term investment policy for the portfolio and that he has directed his staff to re-evaluate the fund’s relationships with its consultants, advisers, brokers and others.
The announcement this week came as DiNapoli revealed that the pension fund had a 2.6% return on its investments in the fiscal year ending March 31. Its strongest earners were private equity funds, which gained 24.8%, and real estate investments, which grew by 14.8%.
“We could have easily maximized our returns closer to 4%,” he said, according to a New York Times news report. Allowing the fund more flexibility, he said, “would be a sound move for the state.”
The official said the move is also warranted because of the ongoing volatility in the nation’s equity markets just as more and more New York state workers are retiring. The fund’s domestic stocks took a beating – losing 6.4% of their value – but that was the only segment of the fund that declined, DiNapoli reported.
“We need some more flexibility,” DiNapoli said, according to the Times report. “We need to have our investments be guided in part by prudence and smart investment decisions rather than by prescription.”