By Joseph Hernandez
New York’s pension fund is one of the largest public retirement systems in the United States, managing approximately $291 billion on behalf of more than one million public workers and retirees. The fund is stable, and benefits are currently secure, but it is not performing at the level that the world’s best-managed funds consistently achieve.
According to the State Comptroller’s own report, the New York State Common Retirement Fund returned 5.84% for the fiscal year that ended March 31, 2025, and has earned an average annual return of 7.74% over the past 10 years. These results are acceptable, but they are not exceptional. Leading pension funds in Canada, Singapore, and Australia routinely earn 1.5% to 3.0% more every year by using more modern strategies and technology.
The difference between a 7.74% return and a 9% or 10% return is enormous. Every 1% improvement in annual return on a fund of roughly $291 billion produces about $2.91 billion in additional value each year. A 2% improvement yields around $5.82 billion; a 3% improvement yields about $8.73 billion annually. Over a decade, those gains compound into $50–$100 billion in extra long-term value. That is money that should be building stronger retirements, reducing taxpayer burdens, and improving New York’s fiscal health.
At the same time, the Office of the State Comptroller employs more than 2,700 people, yet the fund still relies heavily on outside firms to manage its money. The most recent Annual Comprehensive Financial Report shows that the pension fund paid about $1.04 billion in investment management and incentive fees to external managers and a total of $1.10 billion in investment expenses in just one year. When you are paying over a billion dollars annually to outside managers and still underperforming the world’s best funds, something is clearly wrong with the structure.
Why Global Funds Are Outperforming New York
The top-performing pension funds around the world share several traits that explain why they do better:
They use advanced technology, including artificial intelligence, to analyze markets and manage risk in real time. Singapore’s GIC, for example, uses these tools to guide long-term strategy and avoid large drawdowns.
They embrace global diversification, investing not just in U.S. stocks and bonds, but also in infrastructure, private credit, real assets, and high-growth international markets. Canadian and Australian funds are particularly active in these areas.
They employ strong internal investment teams and do not outsource as much as New York does. By managing more assets in-house, Canadian funds have saved billions in fees while still delivering excellent returns.
They rely heavily on co-investments with private equity and private credit managers, which dramatically reduces fees and improves transparency.
New York has the scale, brand, and capital to operate at this level. It simply has not reorganized its investment operations to do so.
What New York Can Easily Implement to Improve Performance
There are several practical steps New York can take right away.
First, the state can adopt AI-driven investment tools to support asset allocation, risk management, and scenario analysis. These tools are already used by leading global funds and large financial institutions. They are not experimental; they are standard practice at the highest level.
Second, the state can shift more investment management in-house and reduce its dependence on expensive external managers. Right now, the fund is paying roughly $1.04 billion in investment management and incentive fees plus additional investment-related expenses that bring total investment costs to about $1.10 billion per year. If even a portion of those externally managed mandates are brought in-house or restructured through co-investment vehicles, New York can save hundreds of millions of dollars per year. Every dollar saved in fees is effectively a dollar added to returns for retirees.
Third, the state can expand co-investments and renegotiate fee structures. By insisting on co-investment rights and fee breaks on large commitments, the fund can reduce layers of “2 and 20” style fees and retain more upside for beneficiaries.
Fourth, the state can improve global diversification. Many of the fastest-growing markets and sectors are outside the traditional U.S. large-cap universe. A more globally diversified portfolio lowers risk and boosts long-term returns.
None of these reforms require new legislation. All of them can be initiated in the first year of a modern Comptroller’s administration.
Why This Matters for Every New Yorker
Improving pension fund performance is not just a technical issue; it is a kitchen-table issue.
When the pension fund earns more, taxpayers ultimately pay less into the system. That means less pressure on school budgets, infrastructure spending, public safety, and property taxes.
Stronger returns mean more secure retirements for the teachers, police officers, firefighters, nurses, and public workers who depend on these benefits after a lifetime of service.
Better performance and lower fees also strengthen New York’s overall fiscal position, supporting a stronger credit rating and reducing long-term liabilities.
New York is not underperforming because of a lack of talent or capacity. It is underperforming because the state has not adopted the modern, proven practices that top global funds are already using, and because it spends over a billion dollars a year on outside managers instead of building a world-class internal investment operation of its own.
A Better Path Forward
As Comptroller, I will restructure how the fund is run. I will push to deploy AI-driven investment tools, build a stronger in-house investment team, reduce overreliance on costly external managers, expand co-investments, and diversify more intelligently across global markets. I will insist that every fee paid and every mandate awarded be justified in terms of long-term net returns for retirees and taxpayers.
New York does not need higher taxes to fix its finances. It needs better management of the nearly $300 billion already under its control.
If other funds around the world can consistently earn higher returns at lower cost using tools and structures that already exist, there is no reason New York cannot do the same. Our retirees deserve it, our taxpayers deserve it, and our state’s future depends on it.