MWBE and Emerging Manager Pension Investments, Fiscal Year 2023
A Message from New York City Comptroller Brad Lander
Dear Reader,
The value of diversity in growing a thriving and inclusive economy is well-documented – and that is certainly true in the investment industry. Including a broad range of expertise and perspectives strengthens performance and helps to drive competitive returns for investment portfolios. Despite the evidence, however, for many years MWBE and smaller asset managers have been largely excluded from participation in investment management. That must change.
As Comptroller for the City of New York, I have the honor of serving as a fiduciary to the New York City retirement systems and working with our five distinct boards in the best interests of nearly 800,000 current and retired public sector employees. We are the fourth largest pension system in the country, valued at $253.19 billion as of the end of Fiscal Year 2023. We are proud of the risk-adjusted investment returns that we continue to secure for our pension plan participants. Our office also co-manages New York City’s municipal finance program, in order to arrange for timely, cost-effective financing of the City’s infrastructure and capital projects.
For the second year, my office is providing an accounting of the critical work we are doing to deepen our partnership with emerging and MWBE asset management and financial services firms. We are pleased to present you with an important update on our work.
Our investments with MWBE and emerging managers have grown over the past year, delivering strong returns for the Systems. Participation of MWBE managers in our US based actively managed asset grew from $16.82 billion (11.65%) at the end of Fiscal Year 2022 to $19.5 billion (12.68%) at the end of Fiscal Year 2023. This increase was part of a strong 8% growth in investment returns for the fiscal year, surpassing the Systems’ 7% actuarial target rate. During FY 2023, our office also contracted with MWBE firms for 31.02% of our bond underwriting, 40.09% of our financial and swap advising, and 22.1% of our bond counsel.
We are also pleased to announce a strategic expansion of “emerging manager” and “emerging-to-direct” investment programs. The Comptroller’s Office’s Bureau of Asset Management (BAM) has worked in partnership with our pension board trustees to analyze the allocations to and performance of diverse and emerging managers within the Systems’ portfolios. In this assessment we’ve found strong performance amongst these managers and have developed a plan to expand our emerging manager footprint and continue to invest in high performing diverse managers.
We anticipate that with the Strategic Expansion, 20% of the pension funds’ US-based, actively managed assets will be invested with high quality minority and women owned investment firms by 2029. As we continue in this important work, we hold our fiduciary duty to the pensioners first and foremost, and we will continue to identify emerging and diverse managers that we believe offer strong risk adjusted returns for our systems.
The Systems have long advocated for diversity in all forms (perspectives, skills, expertise, size and background) as a sound governance principle, particularly through our board diversity initiatives such as the Boardroom Accountability Project and board matrix shareholder proposals. This work reflects our continued commitment to incorporating diversity as a key performance metric.
Sincerely,
Brad Lander
New York City Comptroller