The Lenape tribe got a better deal on the sale of Manhattan island, according to an analysis by New York City's comptroller.

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The Lenape tribe got a better deal on the sale of Manhattan island, according to an analysis by New York City's comptroller.

The Lenape tribe got a better deal on the sale of Manhattan island than New York City’s pension funds have been getting from Wall Street, according to a new analysis by the city comptroller’s office.

The analysis concluded that, over the past 10 years, the five pension funds have paid more than $2 billion in fees to money managers and have received virtually nothing in return, Comptroller Scott M. Stringer said in an interview on Wednesday.

“We asked a simple question: Are we getting value for the fees we’re paying to Wall Street?” Mr. Stringer said. “The answer, based on this 10-year analysis, is no.”

Until now, Mr. Stringer said, the pension funds have reported the performance of many of their investments before taking the fees paid to money managers into account. After factoring in those fees, his staff found that they had dragged the overall returns $2.5 billion below expectations over the last 10 years.

“When you do the math on what we pay Wall Street to actively manage our funds, it’s shocking to realize that fees have not only wiped out any benefit to the funds, but have in fact cost taxpayers billions of dollars in lost returns,” Mr. Stringer said.

Why the trustees of the funds — Mr. Stringer included — would not have performed those calculations in the past is not clear.

Mr. Stringer, who was a trustee of one of the funds when he was Manhattan borough president before being elected comptroller, said the returns on investments in privately traded assets, such as real estate, have traditionally been reported without taking fees into account. The fees have been disclosed only in footnotes to the funds’ quarterly statements, he said.

The stakes in this arena are huge. The city’s pension system is the fourth largest in the country, with total assets of nearly $160 billion. It holds retirement funds for about 715,000 city employees, including teachers, police officers and firefighters.

Most of the funds’ money — more than 80 percent — is invested in plain vanilla assets like domestic and foreign stocks and bonds. The returns on those investments are generally reported after the fees, which are usually paid as a percent of the assets each firm manages.

Over the last 10 years, the return on those “public asset classes” has surpassed expectations by more than $2 billion, according to the comptroller’s analysis. But nearly all of that extra gain — about 97 percent — has been eaten up by management fees, leaving just $40 million for the retirees, it found.

In the “private asset classes,” fees have been an even bigger drag on returns, Mr. Stringer said. To figure out just how big was not easy, he said.


Scott Evans, the comptroller’s chief investment officer, had to work backward from the footnotes in the reports to estimate just how much had been paid to a long list of firms that invested in real estate, shares of private companies and other assets whose value is more opaque. He calculated that the net value of those managers had been a whopping negative — a drag of more than $2.5 billion — since the end of 2004.

Leaders of unions whose members have stakes in the funds said they expected the analysis to lead to changes.

“The fees are exorbitant and we’re not getting a good return on our money,” said Henry Garrido, executive director of District Council 37 and a trustee of the New York City Employees’ Retirement System. “That’s an insane process to keep doing the same thing over and over.”

Mr. Garrido said he saw Mr. Stringer’s emphasis on the high fees as a continuation of the efforts of his predecessor, John C. Liu, to improve controls over the managers of the pension funds.

Michael Mulgrew, the president of the United Federation of Teachers, said he was happy that his union’s pension fund, the Teachers’ Retirement System of the City of New York, had been performing well. But he said the fees paid to some managers were “ridiculous” and should be renegotiated if those managers are retained.

“Education’s always being put under reform; maybe some of these financial practices should be put under reform as well,” Mr. Mulgrew said. He praised Mr. Stringer for taking aim at a line of business that has been very lucrative for Wall Street.

“You are talking about messing with a practice that they don’t want messed with,” Mr. Mulgrew said. “I give the comptroller credit. He’s jumping feet first into this one.”