New York State Governor Andrew Cuomo vetoed a bill that would bump limits on allocations to alternatives for New York City’s five retirement plans.
The bill, passed by state legislators in June, proposed an increase in allowed exposures to hedge funds, private equity, and international fixed income to 30% from the current limit of 25%.
However, Cuomo put a stop to the endeavor and argued the legislation would “potentially [expose] hard-earned pension savings to the increased risk and higher fees frequently associated with the class of investment assets permissible under this bill.”
“The existing statutory limits on the investment of public pension funds are carefully designed to achieve the appropriate balance between promoting growth and limiting risk,” he wrote in a message attached to the veto.
The bipartisan bill said increased allocations to alternatives would help New York City’s pension plans keep up with other large public plans and “allow for a superior risk-adjusted portfolio” and “reduce portfolio volatility while maintaining superior returns.”
It also stated that the current 25% limit prohibited the pension plans from investing in “attractive asset classes and strategies” that would diversify the portfolios—a problem that has manifested in the expected low market return environment.
The city’s five retirement plans—together worth more than $150 billion—reported a combined 17.5% return for the year ending June 30.
Scott Stringer, New York City’s Comptroller and custodian of its retirement plans, maintained his support for the bill.
“In the coming year, we will continue to work with our partners in the legislature and Governor Cuomo to pass this bill,” Eric Sumberg, the press secretary for the office of the comptroller, said.
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