N.J. pension investment panel to disclose fees, bonuses

TRENTON — The New Jersey State Investment Council, seeking to resolve a dispute with the heads of the public worker pension funds, voted Wednesday to report five years' worth of fees, bonuses and performance data for the state's investments.

Tom Byrne, chairman of the council overseeing the investments, said it was unclear how long it would take to compile the report, which will include alternative investments managed externally and funds managed in-house. Council members comprised of governor appointees and pension fund trustees voted unanimously.

"We just want to put it out there and be totally transparent," Byrne said after the meeting.

Pension fund trustees in April began demanding an audit of the state's investments in alternatives, — like hedge funds and real estate — saying the exploding fees and bonuses paid to managers seemed out of line with the returns they've delivered. They've also questioned the changing nomenclature and types of fees reported over the years.

In 2014, the fees and bonuses for the alternative investments hit a high. The state spent about $265 million on management fees and expenses and $335 million on performance bonuses, which are referred to as "performance allocation" in the State Investment Council annual report. It reported $400 million in fees and expenses and $25 million in "commissions" in 2013.

Members of the investment council have defended the shift into alternatives as a prudent strategy for protecting workers' and retirees' money while boosting yields.

They also point out the state only awards larger bonuses when it receives larger returns, and that the figures appeared higher in 2014 because the division included fees not previously reported.

While the Division of Investment manages the majority of the pension funds internally, some categories require highly specialized investment professionals, Byrne said.

"Not everybody can do this kind of stuff," Byrne said Wednesday. "You know, the Yankees could have saved a lot of money on salary if they had hired me to play shortstop instead of Derek Jeter, right? But the overall results might not have been as good."

In the latest round of this ongoing dispute, Gov. Chris Christie's administration in September told the pension fund trustees elected by beneficiaries they have no authority to request an audit of their fund's investments, Tom Bruno, chairman of the Public Employee Retirement System said, declaring a stalemate.

After Wednesday's vote, Bruno told NJ Advance Media he was "cautiously optimistic."

"I don't know what the final report will look like, but I'm at least happy that they're hearing us and taking steps... But until I see the final products it's hard to get jazzed up about it."

That report, he said, will either lay to rest workers' and retirees' fears that they're overpaying or change the council's thinking on alternatives.

Still, Bruno said he's not abandoning his fight for a full forensic audit of the state's investment expenses.

"People want to know the money they've entrusted to the pension division is getting the most bang for its buck and is not being used to further someone's political career and that these are warranted fees," Bruno said.

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