Former Blackstone executive Harry Wilson believes the New York State Common Retirement Fund, a $126 billion pension, should form an investment committee of “world class investors” to “professionalise” the investment process.
The Harvard MBA, a Republican, made his proposal at the “59 Minutes” forum, sponsored by Broadgate Consultants and moderated by the Wall Street Journal’s Peter Lattman. The investment committee would be made up of “seven to nine world class investors” who would “professionalise” the investment decision process. The committee would not replace New York's single fiduciary system, in which the comptroller, currently Thomas DiNapoli, makes all investment decisions.
If you look at the portfolios in pension funds, there’s no rhyme or reason to them
“We have more investment talent in this country and in this state than in any other place in the world,” Wilson said. “If you look at the portfolios in pension funds, there’s no rhyme or reason to them. We need real restructuring of portfolios.”
Last year, New York's attorney general Andrew Cuomo proposed legislation to create a 13-member board of trustees to replace the comptroller as the sole trustee to oversee the state's pension fund. The status of the bill is unclear.
The bill was introduced following the disastrous tenure of former New York State comptroller Alan Hevesi, who allegedly presided over a wide-ranging pay-to-play scandal whereby individuals were accused of accepting sham finder’s fees in exchange for securing commitments from the pension. The scandal ensnared former pension officials, influence peddlers and several private equity firms, though Hevesi has not been accused of wrong-doing in the investigation.
Wilson also criticised the return expectations of public pensions in the US as being “unrealistic”.
“New York State is at eight percent return over time. I don’t know anyone who believes that’s sustainable,” he said. Wilson believes the appropriate figure falls somewhere between five and six percent.
The New York State Common Retirement Fund’s private equity portfolio returned 11.6 percent for the 12 months ended in March 2010, a significant increase from the -22.2 percent reported for the previous 12-month period.