BLK, STT In Focus — Who Will Manage New York City’s $92B Pension Portfolio?

New York City’s pension system is opening a fresh bidding process for tens of billions of dollars in passive equity assets as existing management contracts near expiration.

• Asset managers have until July 15 to submit proposals for the mandates.
• The city's five pension plans collectively hold about $127 billion in equity investments, the majority of which are invested in index funds.
• City Comptroller Mark Levine's office said seeking new bids is part of standard governance practices as current agreements approach their end date.

New York City’s pension system is reportedly seeking proposals to manage around $92 billion in stock index-tracking funds currently overseen by BlackRock Inc. (BLK) and State Street Investment Management (STT).

According to the office of City Comptroller Mark Levine, interested firms, including the current managers, can submit bids through July 15. The move comes as the existing contracts are set to expire at the end of the year.

BlackRock currently manages about $65 billion in passively managed equity funds for the pension plans, while State Street oversees more than $27 billion, reported Bloomberg. 

Governance Review Drives Rebid Process

Levine’s office said the decision reflects an ongoing review of relationships with external asset managers aimed at delivering the strongest returns. The office added that such relationships should not remain on “autopilot.”

The comptroller’s office also said the rebid process is unrelated to recommendations made by former Comptroller Brad Lander regarding BlackRock’s climate-related policies. Instead, it described the move as a matter of good governance, adding that the city last sought bids for the index-fund mandates in 2017, according to the Bloomberg report. Since then, the contracts have been renewed twice without a new bidding process. 

Climate Policies Remain Part Of Evaluation

Levine has been reviewing management of the city’s equity assets since taking office in January. His predecessor had previously recommended removing BlackRock as a manager, stating that the company’s approach to climate issues fell short of expectations. Lander had expressed a more favorable view of State Street’s engagement with companies on environmental matters.

The city’s five major pension plans collectively hold $127 billion in equity investments, the majority of which are allocated to index funds, stated the Bloomberg report.

What’s At Stake

Equity index funds are typically low-cost investment vehicles, with management fees often ranging from 1 to 5 basis points for large pension clients.

Using an average fee of 1 basis point, the $92 billion pool of assets would generate roughly $9.2 million in annual fees. 

BLK, STT Stocks: What Retail Says

On Stocktwits, retail sentiment around BLK stock was ‘bearish,’ unchanged in the past 24 hours, while message volume was ‘normal.’

For STT stock, the sentiment was ‘neutral,’ while message volume was ‘high.’

In the past 12 months, BLK stock has risen over 4%, while STT shares have surged 68%. 

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