Dallas officials question lingering private investments in police and fire pension fund portfolio
The Dallas Police and Fire Pension System — which as been severely underfunded for years — still has about 25% of its assets tied up in private investments.
That’s according to pension system official’s briefing during Thursday’s Ad Hoc Committee on Pensions meeting.
Those include investments in an energy fund, natural resources — and assets in real estate. The private investments were deemed “legacy” assets that the pension system still maintains.
It was risky private investments that landed the system in the situation it’s in now — with over a billion dollars in unfunded liabilities.
“Currently we’ve gotten that down to 26%,” Dallas Police and Fire Pension System Chief Investment Officer Ryan Wagner said during the meeting.
Wagner also said the target for private equity is set at 15% for the fund. And while the investment allocations had been around two thirds of the system’s portfolio and officials have managed to liquidate some of those assets over time — they still are hindering the fund.
“Essentially, across private equity, real estate and natural resources, we’ve either seen flat returns or negative returns over a ten year period,” Wagner said. “So it’s really…what was two thirds of the portfolio dragging down the overall returns of the plan.”
But some Dallas City Council members still expressed concerns over the allocation still going to the private sector.
“I feel that you’ve got 29 to 30% that are these legacy assets,” District 9 Council Member Paula Blackmon said during the meeting. “Either own what you’ve got and make it work, or…cut the bait, because it seems like it is dragging everything down.”
The Dallas Police and Fire Pension System has been severely underfunded for years — to the point the Texas State Legislature stepped in to help remedy the issue. Now the Dallas officials are on deadline to come up with a plan that will fund at least part of the pension system over the next 30 years.
What that looks like is still taking shape. And some council members said during the meeting they still wanted more information about how the investments that are supposed to remedy the shortfall, are being made.
“I feel like we need some third-party objectivity,” District 13 Gay Donnell Willis said. “I feel like we need an independent analysis and maybe some general recommendations.”
And it was clear Willis was looking for more than just financial answers from the pension executives.
“While we don’t want to dwell on the past, taxpayers are on the hook for what we’re trying to do here,” Willis said. “I feel like our taxpayers need closure, because as we talk about the pension they’re waking up to the history…and I don’t really know what to tell them. And when I ask around here nobody seems to know what to tell them.”
Willis read off an email from a constituent asking if those responsible for the funding debacle were held accountable — and also referenced an investigation into the investments that caused the pension crisis.
“The report, which is privileged, was provided to the board,” Dallas Police and Fire Pension System Deputy Executive Director and General Council Josh Mond said.
“And there were lawsuits…the other thing I would note, for better or for worse, it was well publicized the FBI investigated for a very long time and at the end of the day — to our knowledge — no one was ever indicted or anything like that.”
Mond said it was “fair to say” the events in the past had been “examined exhaustively.” Mond has worked for the pension system since 2009 – throughout the events that led up to city officials being required to submit a plan to fix it.
Mond is the brother of District 12 Council Member Cara Mendelsohn, who has been an outspoken voice among the members on securing a cost of living adjustment for public safety employees that rely on the pension.
Wagner has also worked with the pension system since 2012.
Dallas city officials are now looking at an end-of-year deadline to submit a plan that will get the pension fund back on track. That plan is scheduled to be due in November 2024.
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