aiCIO Magazine: Mayor Bloomberg's Attempts to 'Professionalize' NYC's Pension Plans Threaten Wide Array of Embedded Interests

Can a Steven Rattner Pal Be Trusted to Reform City's Pensions?

Mar 07, 2011, 10:33 ET from aiCIO

NEW YORK, March 7, 2011 /PRNewswire/ -- aiCIO today posted Can New York City's Most Celebrated Citizen Revolutionize its Pension System?, an inside look at controversial moves by Mayor Michael Bloomberg to revamp and further "professionalize" New York's pensions.

aiCIO's Joe Flood, Paula Vasan and Kip McDaniel report that Bloomberg's goal to reform the City's pensions operation is not universally applauded. According to Flood, "Bloomberg's pincer assault to alter benefits and upgrade how the system manages capital could reduce the authority of union leadership and City Comptroller John Liu, one of the Mayor's more vociferous critics."

Although Liu is responsible for overseeing NYC's pension management, aiCIO notes that Bloomberg unilaterally hired the City's first chief investment advisor last year and brought on another senior professional to play an influential role on the system's five pension boards. Insiders claim that Bloomberg favors greater attention to risk management and asset allocation and less emphasis on selecting asset managers, which is primarily Liu's domain.

Sources close to the Mayor's office also confided to aiCIO that Bloomberg seeks to ensure the current trustees of the five funds "don't run them off a cliff" before the pension system can be stabilized.

The Citizen's Budget Commission supports the Mayor's pension reform initiatives but other parties, particularly the unions, are apprehensive as he seeks to reduce union influence on the boards. One union president told aiCIO, "Last I checked, there weren't any cops or firefighters driving this country into financial ruin over the last couple years. It was exactly the kind of 'professionals' that the mayor pals around with and wants to give more influence to."

Critics who question the Mayor's judgment point to his selection of Steven Rattner in 2008 to manage a portion of Bloomberg's personal assets. Rattner shortly thereafter was suspended from trading securities by the SEC and recently settled several criminal charges. A long-time pension fund observer remarked to aiCIO that Bloomberg's pension reform effort should be regarded with a measure of skepticism.

"A number of people connected with the City's pension plans acknowledged to us that the system simply makes no sense," said editor-in-chief Kip McDaniel. "Nevertheless, some parties are very satisfied with the status quo and will fight Bloomberg every step of the way in order to prevent change."

About aiCIO

A quarterly online publication, aiCIO focuses on the 5,000 largest pools of capital in the world, across pension plans, sovereign wealth funds, endowments, foundations, insurance funds and other leading institutional investors. aiCIO is edited by Kip McDaniel.

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