Four of New York City’s five public pension systems are seeking asset management firms for passive public equity index-based investment management, including capitalization-weighted indexes, smart beta/alternatively weighted indexes and other types of indexed portfolios. It is the first time the pension systems have solicited public equity index services since 2017.
Existing equity index asset manager mandates are set to expire by the end of 2026, according to the Office of the New York City Comptroller, which serves as investment adviser and custodian for the pension funds.
The pension funds seeking asset managers are the Teachers’ Retirement System of the City of New York, the New York City Employees’ Retirement System, the New York City Police Pension Fund and the New York City Fire Pension Fund. The New York City Board of Education Retirement System, the smallest of the five pension funds, is currently not part of the manager search but may choose to participate at a later date, according to the comptroller’s office .
The five retirement systems hold nearly $320 billion in assets, including more than $127 billion in public equity investments, with the majority allocated to passive index products. The amount allocated to managers selected through the search will be determined based on the needs of each system.
The comptroller’s office will manage the search, while the board of trustees of each pension fund, in cooperation with general investment consultants and the Bureau of Asset Management, will “engage in a rigorous review.” The contract will have an initial term of three years, with options to extend for up to an additional six years.
All of the pension funds’ current equity index managers must participate in this procurement process if they want to be considered for award of a contract under this search, the search notice stated.
“Fulfilling our mandate of delivering strong returns for our public sector workforce and retirees requires ongoing review of our contractual relationships with each of our asset managers,” New York City Comptroller Mark Levine said in a statement. “We cannot keep these relationships on autopilot.”
Per the minimum requirements of the search, prospective bidders must have at least $20 billion in equity index assets under management, with at least one institutional account worth at least $3 billion for at least five years. They also must have a “demonstrated ability” to manage equity index portfolios using either full replication, optimization or stratified sampling methodologies.
Proposals for investment products using leverage, based on derivative strategies or based on exchange-traded products will not be considered, the search notice stated.
Firms interested in bidding must register to download a copy of the notice of search, which details the scope of work, minimum requirements and how to participate. The deadline to submit proposals is July 15.
Tags: Equities, Mark Levine, New York City Comptroller’s Office, New York City Pension Funds, passive investing
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