NYCERS Urges Hedge Funds to Help Ease Puerto Rico Debt Crisis


In a letter sent to hedge fund and opportunistic fixed income managers, Trustees of the New York City Employees Retirement System (NYCERS) called on its hedge fund managers and opportunistic fixed income managers who invest in distressed debt and might therefore, at present or in the future, hold Puerto Rican municipal obligations, to “negotiate in good faith to find a just and equitable solution to” repayment of the municipal debt at the center of Puerto Rico’s economic crisis.  “We believe a long-term approach to {Puerto Rico’s} financial stability,” the Trustees explained, “is in the best interests of NYCERS.”  

“Some hedge fund and other institutional investors’ reaction to the crisis suggests they will seek to impose draconian terms and conditions on Puerto Rico’s bond issuing entities,” Trustees said in the letter.  The Board’s concerns include that “large holders of Puerto Rico debt will seek to raise their stakes and collateralize their debt with the island’s public infrastructure: roads, bridges, sewers, water systems, and other public assets.”  Trustees called for a solution “that will make it possible for the Commonwealth to quickly reach a stable financial footing” and noted their fiduciary duty to NYCERS does not “preclude our expressing well-founded concern that a rush to short-term solutions may not provide a long term path to economic recovery and debt repayment.”  

“The situation in Puerto Rico is dire, and requires immediate action by the federal government to prevent avoidable harm to the Commonwealth of Puerto Rico, our financial markets and to the New York City Employees Retirement System,” said Bronx Borough President Ruben Diaz Jr. “NYCERS’s direct positions within the hedge fund and opportunistic fixed income portfolios do not exist in a vacuum.  It is imperative that these managers negotiate in good faith, take reasonable steps to collaborate with Puerto Rico and ensure the continuation of necessary public services.  Failure to do so could seriously hamper needed investment returns for the pension funds in both the short and long terms. ”
NYCERS is the largest municipal pension system in the United States with $53 billion in assets.  A large number of members, pensioners and beneficiaries are of Puerto Rican descent. The Board is acutely aware of the suffering this crisis has caused its own Puerto Rican members and retirees. By reaching out to these managers, the board reiterated its long term investment strategy which can help to facilitate financial stability to the Puerto Rican economy.

The trustees of NYCERS are John Adler, representing the Mayor;  Comptroller Scott Stringer; Public Advocate Letitia James;  Henry Garrido, Executive Director, DC 37;  Greg Floyd, President, Teamsters Local 237;  John Samuelsen, President, TWU Local 100;  Borough Presidents Ruben Diaz, Jr., Bronx;  Eric Adams, Brooklyn;  Gale Brewer, Manhattan;  Melinda Katz, Queens; James Oddo, Staten Island.


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