In Illinois, the most obvious pension theft is the failure of the state to meet their contribution obligations over decades, resulting in a $110 billion pension liability. Our pension dollars were then used to fund other state services, keeping taxes artificially low.
The New York Times is reporting that the New York city pensions of firemen, police and teachers are “hanging by a thread” due to Wall Street looting and the failure of the city to monitor the fees and profits of Wall Street pension investment managers.
The retirement system has long been plagued by accusations that it has delivered inadequate returns and is in need of a management overhaul. The bureau has around 100 employees and hires Wall Street firms to manage its money. A 2015 report by Mr. Stringer showed that over the past 10 years, those managers took in billions of dollars in fees yet failed to meet fund benchmarks. More than a decade ago, another independent reportalso found fault with the way the system was managed.
The Times also noted:
All in all, the Funston review made more than 200 recommendations, many underscoring the fact that the retirement system has not kept up with the times.
For example, the report noted that the complexity of the system’s assets has exploded in recent years, as more money has been invested in hedge funds and private equity.
But the report found that there were just two people monitoring the $10 billion that the system has invested in private equity. “It is not possible for two individuals to monitor nearly 200 partnerships from 115 managers in a manner so as to properly fulfill fiduciary responsibilities,” the report concluded.
Mr. Stringer estimated it would take five to 10 years to get the Bureau of Asset Management to where it needs to be. The report concluded the bureau currently “has little or no capacity to implement many of the recommendations of this report.”
What percentage of Illinois public pensions are invested in the same kind of high risk, alternative investment plans as New York?
Nobody seems to be able or willing to say.
Are there hidden fees?
The secrecy trend is spreading throughout the country. Last month, for instance, Illinois officials denied an open records request for information identifying which financial firms are managing that state’s pension money. Like their Kentucky counterparts, Illinois officials asserted that the firms’ identities “constitute trade secrets.” Illinois’ Freedom of Information Act includes special exemptions for information about private equity firms.