New York Common Leads All US Public Pension Funds in Commitments to Diverse Firms

The New York State Common Retirement Fund led all U.S. public pension funds in the number of commitments made to diverse-managed funds over a 10-year period—and by a wide margin, too, according to a recent study commissioned by the National Association of Investment Companies.

According to the NAIC, the $274.6 billion pension fund made 62 commitments to diverse-managed funds between 2012 and 2022. The Los Angeles Fire and Police Pension System came in second with 43 commitments, followed by the Teacher Retirement System of Texas and the Teachers’ Retirement System of the State of Illinois, each of which made 38 commitments to diverse managers during the period.

“Despite the daunting landscape, a few pension funds shine as positive outliers—those who emerge as clear leaders who commit to diverse-managed funds,” the report stated. “These top performers show a geographic concentration in states known for progressive policies (New York, California) or states with large, diverse populations (Texas, Illinois).”

The report called out corporate pension funds and union pension funds for cutting back sharply on their investments in diverse firms toward the end of the 10-year period, while public pensions were increasing theirs, albeit “gradually.” Public pension funds’ allocations to diverse fund managers rose to 11.1% in 2022 from 7.6% in 2012, according to the report. Meanwhile, corporate pension funds, which the report said “lag significantly” behind public pensions, committed on average $21.6 million less and were 45% to 49% less likely to invest in minority-managed funds than at the beginning of the period.

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“Union pension funds show even greater inconsistency, with commitments peaking at 9.8% in 2014 but dropping to 0% by 2022,” the report stated. “For the 10 years studied, public pension funds consistently committed more to diverse-managed funds, which likely stems from greater public accountability, diverse stakeholders, and specific social impact mandates. “Corporate and union funds could potentially increase diverse investments by examining and adapting practices from leading public funds.”

The report also identified a “a significant decrease” in commitments to minority-only managed funds over the last two years of the study period. It attributed the decline in commitments to corporate and union pension funds cutting back sharply on their commitments to diverse firms.

“Diverse investment managers face a slew of barriers when attracting pension fund investments,” the report stated, noting that more than 95% of capital commitments are concentrated in non-diverse managed funds, “underscoring entrenched inequities across asset classes.”

In addition to receiving far fewer commitments than non-diverse managers, the commitments diverse-managed funds did receive were 25.6% smaller, on average, than non-diverse funds, according to the report. On top of that, diverse-managed funds require a median of $45 billion in assets under management to attract public pension investments, compared with $20.2 billion for non-diverse funds.

Public Pension Fund	Commitments to Diverse-Managed Funds*
New York State Common Retirement Fund	62
Los Angeles Fire and Police Pension System	43
Teacher Retirement System of Texas	38
Teachers’ Retirement System of the State of Illinois	38
Connecticut State Employees Retirement System	36
California Public Employees’ Retirement System	34
California State Teachers’ Retirement System	32
San Francisco Employees’ Retirement System	31
Connecticut Retirement Plans and Trust Funds	29
Public Employees’ Retirement System of Nevada	28
State Teachers Retirement System of Ohio	28

Source: National Association of Investment Companies
*Commitments made between 2012 and 2022.

New York State Comptroller Files Diversity Proposals

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Tags: CalPERS, CalSTRS, Connecticut State Employees' Retirement System, diverse investment managers, Diversity, Los Angeles Fire and Police Pension Plan, NAIC, National Association of Investment Companies, NYSCRF, Pension Funds, study

The Madoff Victim Fund has made its 10th and final distribution payment, bringing its total recovery amount to $4.3 billion paid out to nearly 41,000 victims of Bernie Madoff’s massive fraud that was uncovered more than 15 years ago.

The fund, which has exhausted the money available for distribution since beginning payments in 2017, will close down once those final finds are distributed.

The final installment consisted of $131.4 million to 23,408 victims, representing an average payment increase of 2.71% to each victim. According to the fund, the latest installment raised the total amount recovered for the 40,930 eligible victims to close to 94% of their aggregated losses, up from 91% prior to the final distribution.

While the $4.3 billion of eligible recoveries is just a fraction of the estimated $64 billion in losses stemming from Madoff’s Ponzi scheme, MVF Special Master Richard Breeden said the fund doled out as much as was legally possible.

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“While applicable law sets limits on what can be done, we hoped to assist everyone as much as possible,” Breeden said in a statement. “Bringing 41,000 victims to a 93.71% recovery is the fulfillment of our greatest hopes.”

“The losses of ‘direct investors’ had been carefully studied in bankruptcy, but the losses of ‘indirect investors,’ who aren’t eligible for bankruptcy recoveries, had not been analyzed,” prior to the Madoff fraud and creation of the victims’ fund, Breeden’s statement continued. “As it turned out, ‘direct investors’ represented only about 6% of Madoff’s known victims.”

According to the MVF, it has approved more than 2,000 institutional investors’ petitions for recovery, of which 864 were charities or nonprofit organizations, in addition to at least 108 universities, colleges, professional schools or secondary schools. Another 633 institutional investors were corporations. Approximately 74% of the institutions petitioning for funds were organized in the U.S., with the rest from 23 other countries.

According to the fund, 742 (3.2%) of the 23,408 victims approved for distributions in the final installment incurred losses of more than $1 million. Another 1,594 (6.8%) had fraud losses of more than $500,000, and 3,950 (approximately 17%) experienced losses of between $100,000 and $500,000, while 17,864 (more than 76%) suffered losses of less than $100,000.

Breeden said that following the flow of funds from Madoff to his victims “was an arduous effort, but it had to be done.” He said to determine how much the fund should pay out and to whom, it measured how much the investors invested in, or took out, of the fraudulent scheme and its proceeds. He said this involved reviewing millions of pages of documentation regarding hundreds of thousands of financial transactions and mailing more than 1 million notices, collateral recovery updates and checks to victims over the past decade.

“In 2025, eight years after our first distribution, MVF will complete its work,” Breeden said. “We have brought tens of thousands of victims to the greatest recovery we could achieve.”