Key Takeaways
- • The five New York City public pension systems (NYCRS) returned 8.0% net of fees for the fiscal year ending June 30, 2023, above the 7% state-set target rate, according to the Office of the New York City Comptroller.
- • Assets under management reached over $253 billion at fiscal year-end, with a combined funded ratio of 82% (as of June 30, 2022) versus a 78% average for U.S. public pension plans.
- • The strong return reduces the City's required pension contributions by approximately $550 million over the next five fiscal years.
- • Public equities drove the bulk of gains, contributing over 91% of NYCRS returns as the MSCI ACWI rose 17% after a 16% decline in FY 2022, while alternatives delivered close to flat performance.
- • Long-term annualized returns were 7.5% over 3 years, 6.8% over 5 years, and 7.9% over 7 years, net of management fees.
Summary
The Office of the New York City Comptroller announced that the five City pension systems achieved an 8.0% net-of-fees return for the fiscal year ended June 30, 2023. The Comptroller's Bureau of Asset Management (BAM) manages the systems, which together hold over $250 billion and serve more than 750,000 public servants. The return exceeds the 7% target rate set by the state legislature, which will allow the City to reduce its required pension contributions by roughly $550 million over the next five fiscal years. The annual adjustments are phased in over five years to smooth their budgetary impact. BAM noted that one-year returns are volatile and that the year followed one of the worst stock market years in decades, so it emphasized long-term performance: annualized net returns were 7.5% over three years, 6.8% over five years, and 7.9% over seven years.
Total assets under management closed the fiscal year at over $253 billion. The combined funded ratio was 82%, calculated as of June 30, 2022 and to be updated later by the Actuary, compared with a 78% average among U.S. public pension plans. City Actuary contribution levels are projected to bring the systems to 100% funding by 2032. Allocation across asset classes is approximately 45% public equities, 30% public fixed income, and 25% private markets alternatives, including private equity, real estate, infrastructure, and private credit. Among the largest holdings reported were U.S. equity at $72.4 billion, core fixed income at $52.4 billion, private equity at $24.4 billion, and private real estate at $16.8 billion.
According to the report, public markets generated most of the year's returns. The MSCI ACWI rose 17% in FY 2023 after falling 16% in FY 2022, and public equities contributed over 91% of NYCRS returns. Fixed income saw partial recovery, though rising 10-year Treasury yields, which moved from 2.8% to 3.8%, pressured fixed-rate bonds. Credit performed strongly in the second half of the fiscal year. Within alternatives, infrastructure produced stable income, and real estate continued to generate income despite price pressure in commercial office markets. Private equity saw reduced exits and distributions amid lower M&A activity, with valuations marked down in the second half of the year, though BAM expects strong long-term performance. Hedge funds posted positive returns despite mixed results in macro-defensive strategies.
The report also covered responsible fiduciary investing. In April 2023, Teachers, NYCERS, and BERS announced Net Zero Implementation Plans targeting net-zero emissions by 2040. The systems also pursued shareholder advocacy on labor issues. Apple agreed to a third-party assessment of its labor practices after a NYCRS resolution, and 52% of investors supported a resolution at Starbucks requesting a similar assessment, which the report describes as a historic win for investors.
Total assets under management closed the fiscal year at over $253 billion. The combined funded ratio was 82%, calculated as of June 30, 2022 and to be updated later by the Actuary, compared with a 78% average among U.S. public pension plans. City Actuary contribution levels are projected to bring the systems to 100% funding by 2032. Allocation across asset classes is approximately 45% public equities, 30% public fixed income, and 25% private markets alternatives, including private equity, real estate, infrastructure, and private credit. Among the largest holdings reported were U.S. equity at $72.4 billion, core fixed income at $52.4 billion, private equity at $24.4 billion, and private real estate at $16.8 billion.
According to the report, public markets generated most of the year's returns. The MSCI ACWI rose 17% in FY 2023 after falling 16% in FY 2022, and public equities contributed over 91% of NYCRS returns. Fixed income saw partial recovery, though rising 10-year Treasury yields, which moved from 2.8% to 3.8%, pressured fixed-rate bonds. Credit performed strongly in the second half of the fiscal year. Within alternatives, infrastructure produced stable income, and real estate continued to generate income despite price pressure in commercial office markets. Private equity saw reduced exits and distributions amid lower M&A activity, with valuations marked down in the second half of the year, though BAM expects strong long-term performance. Hedge funds posted positive returns despite mixed results in macro-defensive strategies.
The report also covered responsible fiduciary investing. In April 2023, Teachers, NYCERS, and BERS announced Net Zero Implementation Plans targeting net-zero emissions by 2040. The systems also pursued shareholder advocacy on labor issues. Apple agreed to a third-party assessment of its labor practices after a NYCRS resolution, and 52% of investors supported a resolution at Starbucks requesting a similar assessment, which the report describes as a historic win for investors.
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