MWBE and Emerging Manager Pension Investments, Fiscal Year 2024
A Message from New York City Comptroller Brad Lander
Dear Reader,
I am pleased to report on the progress the New York City retirement systems have made on investing with diverse and emerging asset managers for Fiscal Year 2024. We started making this data public two years ago, believing that honest, transparent reporting is critical to progress. Since then, we’ve made great strides.
As Comptroller for the City of New York, my first priority is delivering strong returns for the nearly 800,000 beneficiaries of the City’s five public pensions, current and retired municipal employees who have served our city, taught our kids, kept our neighborhoods safe, tended to our families’ health, and so much more. For Fiscal Year 2023-2024, we achieved a combined net return of 10.0% across our five Systems, surpassing our 7% actuarial target rate, outperforming many of our peers, and saving New York City $1.8 billion that we can invest instead in our school, parks, and communities.
Our increased investments in MWBE and emerging asset managers have been a key to this success. Through a rigorous due diligence process and investment program, we have steadily increased our exposure to MWBE and emerging asset managers, all while achieving those strong returns.
Since my tenure as Comptroller began, assets under management by MWBE managers has increased by over $6 billion, or nearly 40% – from $16.8 billion (11.65% of actively-managed US assets) at the end of Fiscal Year 2022, to $19.5 billion (12.7%) at the end of Fiscal Year 2023, to $23.08 billion (13.3%) at the end of Fiscal Year 2024.
Throughout our portfolio, investment firms owned by people of color and women are among our best performing managers. Our private markets MWBE firms in the Systems portfolio continue to outperform their respective benchmarks with an average public markets equivalent (PME) spread of 5%.
These strong results show that investing in diverse and emerging managers bolster our funds’ performance – and that the ongoing political attacks on DEI and ESG are misguided. We continue to deliver wins for our beneficiaries thanks to the best-in-class managers within our diverse and emerging investment program. Our commitment to a continued expansion of this program is based on our real-world experience that prove a diverse portfolio helps ensure the strong, risk adjusted returns that the hundreds of thousands of members and beneficiaries our pension systems serve rely on.
Our performance has been strong in municipal finance as well. During FY 2024, our office contracted with MWBE firms for 26.33% of our bond underwriting, 41.96% of our financial and swap advising, and 22.96% of our bond counsel.
Our commitment to diversity, equity, and inclusion is part of our broader responsible investing approach, paying attention to environmental, social, and governance risks in order to drive strong, long-term returns. This year we invested in the preservation of 35,000 units of rent-stabilized housing and established the first tenant protection standards for investor-owned housing nationwide. We continued to attend to workforce management issues, including freedom of association for workers to organize, leading shareholder efforts at Starbucks and other portfolio companies. Our engagement with some of the world’s largest banks persuaded them to disclose key climate transition information for the first time.
This year’s strong data and returns underscore our unwavering commitment to building a stronger, more prosperous future and meaningfully moving the needle on diversity, equity and inclusion within financial services.
As we approach 2025, institutional investors are faced with both a challenge to stand firm as misguided attacks on DEI and ESG continue and likely even grow, and an opportunity to reaffirm our commitment to diverse and emerging asset managers. The onus is on us to ensure that high-quality managers are not left out in the cold and that they have the access to capital and opportunity they need to invest in a better future for all of us.
I am proud of the work that my office is doing on behalf of our five Systems as a leader among our peers as we continue to incorporate diversity as a key performance metric. Thanks go especially to Taffi Ayodele, our Director of Diversity, Equity, Inclusion and Emerging Manager Strategy, to Steven Meier, our Chief Investment Officer, to our Asset Class Heads, and to the hardworking staff of the Bureau of Asset Management staff, who share a vision for a more inclusive and dynamic investment ecosystem, as they work every day to maximize returns and guarantee retirement security for our beneficiaries.
As with each update, and in this moment particularly, I want to reaffirm our commitment to deepening our partnership with diverse and emerging asset managers. We are firmly grounded in the evidenced-based belief that diversity is key to our success and is central to a resilient and profitable investment portfolio.
Sincerely,
Brad Lander
New York City Comptroller