A new report released today by the office of NYC Comptroller Scott Stringer found that the operations of the Bureau of Asset Management (BAM) which oversees the investments of the $160 billion New York City Pension Fund is antiquated, decentralized and in need of a serious overhaul.
The report is the first independent analysis of BAM's operations since 2002. It is a comprehensive assessment of a nearly 100-person unit of the comptroller's office-- a unit the controller himself admits is mired in bureaucracy.
"We have to fundamentally rethink how the Bureau of Asset Management does business," said Stringer. "For too long, too little attention has been paid to our investment operations and there was a sense that nothing could be done to cut through an intractable bureaucracy... We must re-engineer every process and procedure and bring our investment operations into the 21st century."
Some of the top-line issues outlined in the report included a failure of the bureau to standardize its processes for vetting investment managers and the reporting back to trustees; a reliance on senior management for approval of routine tasks that resulted in an unnecessary bottleneck and slowdown of key decisions; a lack of a formal strategic plan for budget and operations; understaffing at the asset class level due to ineffective recruitment and historically low compensation; and an antiquated and decentralized system for storing and managing data, amongst other concerns.
The comptroller's office offered recommendations to the bureau and said it will work with the Trustees of all five pension systems to address each of the issues in the report. In the meantime, his office has taken on several reforms and compliance functions of BAM through key hires and process implementation, as well as created a Common Investment Meeting.
However, said Stringer, to bring about fundamental change, a more comprehensive analysis needed to be done with greater oversight and reporting.
Stringer said he and CIO Scott Evans will be working with System Trustees to develop an implementation roadmap for reorganizing BAM which they will present at the Common Investment Meeting in March.
"Every day, we are changing systems and revising best practices and being honest, transparent and upfront about our challenges, our strengths and our path forward," said Stringer. "This comprehensive review provides us a clear picture of what steps we need to take to address our most critical needs."
To see the full report, click here.