NYC pension funds beat investment benchmarks

New York City’s pension funds are enjoying their third consecutive year of positive pension returns. 

The five funds’ returns for fiscal year 2025 beat the actuarial targets and will reduce New York City’s pension obligations, City Comptroller Brad Lander announced at a press conference on Wednesday.

“While I feel proud of the returns for this year and the past three years,” Lander said at the press conference, “I really feel even prouder of the ways that we repositioned the portfolio for greater success and outperformance in the years to come.”

The five funds’ net returns are 10.3% this year, beating the target return of 7% set by the state legislature. That will lower New York City’s pension obligations by $2.18 billion over the next five years. The funds’ total assets are now $294.6 billion. 

The funds saw annualized average three=year returns of 9.4%, five-year returns of 8.5%, seven-year returns of 7.8% and 10-year returns of 7.7%.

“The rapidly shifting monetary policy and continued uncertainty throughout the market underscores the importance of a steady and long-term investment approach rooted in thoughtful diversification,” Chief Investment Officer Steven Meier said in a press release. “We remain aware of the existing challenges and are focused on thoughtful portfolio construction and disciplined manager selection and recommendations.”

New York City’s pensions are around 80% funded, Lander said. He estimated that number may reach 85% this year when the city’s actuary finishes calculations. New York is on track to fully fund its pension obligations by 2032. 

New York City has five pension funds: the Teachers’ Retirement System, Employees’ Retirement System, Police Pension Fund, Fire Pension Fund, and Board of Education Retirement System. Each pension fund has its own board, with half of the members representing the union and half appointed by the city.

The city’s pension funds are reaping benefits of a 2022 state law, according to Lander, which increased the share of assets that city and state are allowed to invest in private markets to 35% from 25%. 

Since the passage of that law, the city has been gradually increasing its private investments, according to Meier. Private investments — such as equities, real estate and infrastructure — make up around 20% of the funds’ assets, and the city aims to grow that to around one-third of the funds. 

The funds’ highest-performing sectors for this year include U.S. equity, ex-U.S. equity, emerging markets and infrastructure. 

“You would be tempted, from this year’s results, to put all your assets in public equities. But that would be a mistake if you are a long-term investor responsible for delivering an all-weather portfolio,” Lander said. “If we look at five-, seven- or 10-year returns, our private markets portfolio has outperformed public markets.”

In fiscal 2024, the pension funds achieved a 10% net return, which saved city taxpayers $1.8 billion. 

Lander and some of the city’s pension funds have been champions of environmental, social and governance investing. Three of the city’s pension funds have roadmaps to reach net zero greenhouse gas emissions within their portfolios by 2040. 

The police fund and firefighter funds have not participated in these commitments, Lander said, although he noted that those funds invest in renewable energy sources. 

Fiscal 2025 was a bad year for oil and gas stocks, so the three funds that have divested from fossil fuels moderately outperformed the police and firefighters’ funds, Lander said.

Last year, the Employees’ Retirement System purchased $60 million of mortgages for affordable housing units which had been owned by Signature Bank. When the bank collapsed, Lander said, the city worried the units would fall into the hands of unscrupulous landlords and the tenants would lose rent stabilization. 

Returns from the housing units exceeded the 11% target the city set for them.