Public Capital

If elected, the Democratic Party slate would control the city’s retirement systems, comprising five pension funds and covering the city’s municipal employees, police officers, firefighters, teachers, and other public school employees. In total, the pension funds cover roughly 870,000 current and former New Yorkers, half of whom are retired.

Altogether, the pooled pension system has approximately $280 billion worth of assets under management. This makes it the United States’ fourth-largest public pension plan and one of the world’s foremost institutional investors.

Each pension fund is financially independent and governed by its own board of trustees. The comptroller, currently Brad Lander, sits on each board and provides investment advice, while his Bureau of Asset Management oversees each fund’s investment portfolio. Mark Levine is the Democratic nominee for City Comptroller and will take office in November if elected.

Levine won his race against progressive Justin Brannan, who was endorsed by Bernie Sanders and the Working Families Party. That said, Politico’s Joe Anuta reported that Levine and Brannan had “strikingly similar platforms and political proclivities,” both having staked their campaigns on challenging Trump’s attacks on New York City.

Mamdani will nominate a representative to each pension fund’s board of trustees should he be elected in November. Under the leadership of Mamdani, along with figures like Levine and Public Advocate Jumaane Williams who already sit on the board of New York City Employees’ Retirement System, there is a substantial opportunity to shift the balance of power in the city away from Wall Street.

Asset Management

To understand that opportunity, we need to first examine the pension system in its current form. New York City’s public school teachers and staff, firefighters, police officers, and municipal employees contribute to their pension pots, with additional contributions made by their respective employers.

These pools of capital are then committed predominantly to external investment managers, who operate investment funds in public and private capital markets. Most of the NYCRS’s investments lie in US-listed stocks and low-risk bonds, with additional commitments to private equity, real estate, hedge funds, and infrastructure.

External investment managers are the linchpins of the entire investment arrangement. They act as mediators between pension funds, sovereign wealth funds, university endowments, and insurance companies on the one hand, and the multimillion-dollar investments that structure the modern world on the other. After a dramatic rise since the 2008 crisis, traditional asset managers like BlackRock, State Street, and Vanguard now rule stock exchanges globally, while “alternative” asset managers like Blackstone, Apollo Global Management, and KKR oversee significant swathes of key social assets like housing, energy, and transportation.

The asset management model involves payment of two types of fees for the investment services provided to pension funds and other institutional investors. Performance fees are paid according to the return generated at the end of the investment cycle, while management fees are paid throughout the duration of the investment period for the asset manager’s services.

These fees have resulted in senior executives from the asset management world becoming some of the highest-paid individuals on Wall Street. Blackstone CEO Stephen Schwarzman can bring home a billion dollars in compensation in a single year alone.

While the external investment management model, with management of assets outsourced to third-party firms, is presently the dominant form, its positive reputation among pension funds is waning. As the Financial Times reported in July, the University of California’s endowment and pension fund decided to divest from hedge funds after their managers failed to sufficiently safeguard their investments.

The chief investment officer lambasted the industry at large: “Hedge funds are a fantastic business if you’re on Wall Street, and you can charge a great fee and then you can afford to buy all the art and the private jets and the amazing houses in the world.”

The massive financial leakages in the form of fee payment represent one concern, but there is also the lack of transparency in investment management. For example, California mega pension funds CalPERS and CalSTRS took Blackstone to task in 2023 after a portfolio company owned by the Wall Street behemoth was implicated in a child labor scandal.

A thirteen-year-old Guatemalan girl in Nebraska, who was working for the Blackstone-owned company, came to school with chemical burns. This led to the discovery of more than one hundred children employed as nighttime sanitation workers in slaughterhouses across eight states. A CalPERS board member pushed the pension fund to reconsider its future commitments to Blackstone and to demand greater clarity on the impacts of their investment, underscoring the importance of such roles in the NYCRS.

A Win-Win System

There is another good reason for New York City’s elected officials to undertake a step change in protocol: the money they commit to external investors is being used to provide the Trump administration with critical support and resourcing. Marc Rowan, Apollo’s CEO, gave millions to Trump and other Republicans during the 2024 election cycle, and has voiced his support for the president’s attacks on universities. At one point, Rowan was tipped to be the front-runner for the position of Treasury secretary in Trump’s cabinet.

Apollo oversees $2.4 billion of NYCRS’s assets, charging the five pension funds for the investment service that helps generate Rowan’s enormous personal wealth. Similarly, Blackstone manages $1.6 billion of NYCRS assets, and CEO Schwarzman gave tens of millions to Trump and other Republican candidates last year. Antonio Gracias, the founder and CEO of Valor Equity Partners, helped Elon Musk lead the Department of Government Efficiency (DOGE) while his firm oversees $500 million in investments from New York City’s public sector employees.

Under the lead of Levine and Mamdani-appointed representatives, the NYCRS should look to model itself after Canada’s largest public pension funds, known collectively as the “Maple 8.” The Canadian model is unique in bringing investment management expertise in-house, as opposed to handing responsibility (and payment of massive fees) to external asset managers.

This approach cuts into the sector’s grotesquely inflated bonuses and its financial support for right-wing politics. Following Canada’s example in New York would have the added bonus of not requiring Governor Kathy Hochul’s approval, unlike Mamdani’s fiscal policy changes and need for increased state funding.

However, the NYCRS should diverge from the Maple 8 in its approach to investment. This would mean moving away from an extractive model that displaces low-income tenants at home in Toronto, or contributes to failing infrastructure and rising utility bills for customers overseas.

The critical capacity of New York’s public pension funds should instead be used to deliver on long-term investment in local, low-carbon infrastructure that improves the lives of New Yorkers. Such investments could support wind farms off the coast of the Rockaways, heat pumps for those who can’t escape to the Hamptons for the summer, or electric vehicle plants in deindustrialized neighborhoods in the Bronx and Queens.

As the think tank Common Wealth has argued, progressive pension reform makes it possible to create “a win-win system where patient investment in a healthy, and sustainable economy is coupled with financially secure and dignified retirement for all.” Recent moves from Comptroller Lander have shown this is already feasible. The New York City Employee’s Retirement System stepped in to save 35,000 rent-stabilized homes and keep them affordable after the lender for the apartment buildings went bust.

A Vital Opportunity

Why shouldn’t our pension wealth be mobilized to deliver for the social good? As economist Grace Blakeley points out in her book Vulture Capitalism: “BlackRock’s money doesn’t really belong to BlackRock; it belongs to us. Yet that money is being used to augment the power and wealth of those at the top at the expense of everyone else.”

Despite the fact that the NYCRS is one of the largest pooled pension funds in the country, the direct implications of divestment on the resourcing of Wall Street’s operations are admittedly limited. However, New York’s public pension funds can provide an exemplary case study for other funds across the country frustrated with the fee structure and the moral nihilism of asset managers. Mamdani and the progressive slate standing in November’s election have a vital opportunity to deliver on this front for ordinary New Yorkers while simultaneously pushing back against Wall Street and Trump.