NJ pension seeks more fee disclosures

Following his induction as head of the New Jersey State Investment Council last week, Tom Byrne has spoken out in favor of offering the public more information on private equity fees paid by the pension.

Byrne, who also runs asset management firm Byrne Asset Management, is committed to becoming “more granular” in the pension’s reporting, a decision he said he arrived at after looking through prior annual reports. “I want to take the next step and break down fees as much as makes sense so that people can understand why certain costs are incurred,” said Byrne in a call with pfm.

The comments highlight a growing tension between GPs, who argue fees should be kept confidential on competition grounds, and public pension plans, who are under pressure from transparency advocates that want seven-figure fee receipts to be part of the public domain.  

Currently, New Jersey publishes an annual report after the end of its fiscal year each June, which contains fee information for every asset class, including a total for “private equity fund management and other fees.” Bryne, however, would like this information to be more specific, breaking down fees paid in management costs and carried interest and publishing fee information on a more frequent basis, “as often as necessary.”

Similar to what other pension fund stewards have previously told pfm, Byrne said he has heard more from reporters requesting this level of detail rather than the actual pensioners themselves, but noted that if the media transmits the information accurately to the pensioners, they will be the ultimate beneficiaries.

“It’s their money. We want to put the information out there and they can do with it as they choose,” said Byrne.

Particularly, he hopes that further disclosures will help to clear up the stigma that carried interest (or incentive fees) has garnered in the public eye. “People should be more aware that incentive fees are a good thing, they mean that the firm has made a lot of money for us,” Byrne added.

The New Jersey State Investment Council oversees the New Jersey Division of Investment, one of the largest pensions in the US with approximately $79.7 billion in assets. The pension currently allocates 9.11 percent, or 7.26 billion, to private equity, with a 9.25 percent target allocation.