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Bad Gambles by NYCERS

To the Editor:

The losses of the Standard and Poors 500 index through Oct. 7 mean that the New York City Employees' Retirement System lost $5 billion in the first 100 days of the fiscal year. We are in the middle of the worst financial crisis in memory.

On Sept. 23, in the midst of this turmoil the NYCERS trustees decided to commit 3 percent of the fund's money to hedge fund investments. In this financial environment, the trustees have inadequate investment advice. It is not even clear how they are going to free up 3 percent of a contracting portfolio to give to hedge fund managers.

Since 2000 the trustees have adopted an expensive, highly aggressive investment policy. They were attempting to support a high actuarial rate of return, which in turn allowed the city to make lower annual contributions to the pension system. This strategy has sailed right into a hurricane. The trustees have gambled big and lost big.

This year the city has a $6-billion pension bill caused by the last market collapse six years ago. I cringe at the thought of what this new collapse will cost. Maybe it's time to return to a steady low-risk investing policy and not spend $150 million a year on fees to managers who cannot deliver.

By the way, the city's budget is in free fall. Maybe that $150 million could save a few city jobs.

JOHN MURPHY

Editor's note: Mr. Murphy is the former Executive Director of the New York City Employees' Retirement System.