QUESTION
What adjustments are pension fund managers making to investment strategies amidst high inflation and elevated interest rates?
4:21:09
·
114 sec
New legislation allows NYC pension funds to diversify investments into private markets, aiming for additional returns in the current economic climate.
- Brad Lander, New York City Comptroller, explains legislative changes that increase pension fund investments in private markets from 25% to up to 35%.
- The adjustments address challenges posed by high inflation and elevated interest rates impacting the fixed income portfolio.
- Investments are diversified into private equity, private credit, infrastructure, and real estate.
- This strategic asset allocation review aims to secure better returns during economic uncertainties.
Justin L. Brannan
4:21:09
I wanna talk about some of the pension investment strategies.
4:21:17
The investment landscape has obviously changed recently with elevated interest rates and high inflation, how are fund managers adjusting their pension investment strategies during this time?
Brad Lander
4:21:31
So I'm pleased to say this was an area where something that we did together really puts us in a stronger position because you're right, these are constantly evolving times.
4:21:39
Interest rates are high.
4:21:41
As a result, our fixed income portfolio is facing a series of challenges.
4:21:45
But one thing that we did in Albany back in 2022.
4:21:49
It was got state legislation changed to increase what's called the basket clause.
4:21:55
Before that, The city was required to have 75% of the pension fund portfolio in either public equities in the stock market.
4:22:05
Or in fixed income in debt instruments and could only have a quarter or 20% in what are called private markets and private equity, infrastructure, real estate, private credit.
4:22:18
And those turned out to be asset classes that in an environment like this, give you opportunity to secure some additional returns.
4:22:26
We went to Albany and got legislation to raise that from 25% to as much as 35%.
4:22:33
We then underwent this past summer what's called strategic asset allocation where you look at how to put your assets across those various asset classes and used a little bit of that.
4:22:44
We didn't go all the way up to 35 percent, but we've bent from 25% to 30% increasing our exposure in private equity, private credit, infrastructure and real estate, which our investment managers believe will be good investments to have during the time of this.