New York advances state bill to increase alts allowances

This is not the first time that a basket clause bill has been approved by the legislature and sent to the governor of New York. In 2014, a bill extending the basket clause to 30% of pension fund assets was vetoed by the then government. Andrew Cuomo.

“Existing statutory limits on investment by public pension funds are carefully designed to strike the appropriate balance between promoting growth and limiting risk,” Cuomo said in his veto message. “This bill would upset that balance by potentially exposing hard-earned retirement savings to the increased risk and higher fees frequently associated with the class of investment assets permitted under this bill.”

In 2014, as in 2022, the New York City Retirement Systems advocated greater flexibility in asset allocation. “The current 25% limit on alternative investments prevents the city’s pension funds from creating an optimal investment portfolio,” a spokesman for then-City Comptroller Scott Stringer said at the time. The Comptroller is the trustee of the five pension funds in the city’s pension system.

Eight years later, Controller Brad Lander presented the same message. “The law…does not reflect the realities of the modern investment world and hampers our ability to prudently diversify our portfolio, maximize our risk-adjusted returns and save money over the long term,” Lander said. in February before joint testimony. State Senate General Assembly hearing on the proposed state budget for fiscal year 2023. “The 25% basket clause allocation has not been adjusted since 2006, the date at which it has been adjusted from 15% to 25%.

The basket clause’s increased asset allocation will help city pension funds ‘cautiously diversify’ their portfolios and ‘achieve potentially higher returns while maintaining a consistent and prudent level of risk’ , he added.

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