N.J. pension investment fees up at $728 mln in 2015
New Jersey's (N.J.) government worker pension fund has paid about $728 million in fees to private fund managers for the year 2015. Public employees say that alternative investment returns of pension fund are not at all justifying the high fees being paid to fund managers. Labor leaders have turned against the payment of huge fees to private fund managers.
According to the latest annual report on pension investments, outside fund managers have received about $400 million in fees and $328.4 million in forms of performance bonuses for the financial year ending June 2015. Some officials from New Jersey's pension investment support higher fees to fund managers, while saying state's alternative assets are proof that these investments are a boon to the fund.
NJ.com reports that there's criticism among public employees that the higher fees and bonuses paid to managers don't warrant the returns. However, the State Investment Council says the declining fund would have further gone worse without those investments. The New Jersey State AFL-CIO has termed the exorbitant fees as 'astounding.'
About one-fourth of fund investments are managed by private fund managers and rest by in-house management. Charles Wowkanech, President of the state AFL-CIO, said in a statement that "it's outrageous that Wall Street millionaires are becoming Wall Street billionaires at the expense of middle-class workers and retirees."
Wowkanech claims the fund has spent $375 million on management fees and expenses on alternative funds. In addition to this, New Jersey's pension fund has also spent $328.4 million on performance bonuses to managers. The total cost in managing New Jersey's pension fund rose 14 percent in 2014 from $615.9 million spent on alternative management in 2014, as reported by Politico New Jersey.
Tom Byrne, Council Chairman, said "I do think, and I don't want to overstate this, but I do think we've made some progress with a good many of the labor representatives and labor leaders on the issue of alternative investments. The declining stock market, maybe more than I could have, reinforced this notion that you can't put all your eggs in one basket."
New Jersey's pension fund has about $75 billion in unfunded liabilities. This has been resulted in under payment by previous governors including Democrats and Republicans.
Meanwhile, New Jersey's Supreme Court has rejected New Jersey employees' appeal over pension fund. The public worker unions moved the Supreme Court against the Governor Chris Christie. The latest ruling supports Christie to make about $1.9 billion payment to the pension fund in 2017 budget. It's much lower than the $3.8 billion payment that was agreed in the 2011 legislation. Christie couldn't honor this payment owing falling revenues for the past two financial years, according to Fox News.
The returns on pension funds were 4.16 percent above the benchmark and average of other public pension funds. However, it's less than the double-digit returns during the past few years. New Jersey's fund balance fell to $79 billion by end of June 2015 from $81.2 billion, and its rate of return is 7.9 percent as actuaries advise the fund not to add any more liability.