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New York’s public pension scheme was weighing whether to boost its allocations to overseas markets as Donald Trump’s erratic policy measures upended the outlook for global markets.
Steven Meier, chief investment officer for the New York City pension systems, which manage about $290bn of assets for the city’s municipal workers, told the Financial Times he was considering a “gut check” review of its asset allocation at the end of the year.
“There’s been a lot of changes in policy in Washington the last few months. Those policy changes have raised the level of uncertainty and volatility in the marketplace,” Meier said, adding that the changes may affect the fund’s underlying assumptions concerning GDP growth, inflation, productivity, government spending and private capital flows.
The funds have 15 to 20 per cent invested in Europe and less than 5 per cent invested in Asia.
The New York City pensions investment chief said international diversification was a “benefit to a portfolio . . . particularly coming off of a time when the US has really outperformed and portfolios are so dominant in US dollar assets”.
He added that Europe’s plans to increase spending on defence “would probably combine to deliver a more vibrant economy in Europe which means more investment opportunity” and that he was “increasingly” looking at more opportunities in Asia because the funds’ holdings there were “so small”.
However, he added that any asset allocation changes would be incremental and US markets would continue to dominate the portfolio. “As a US dollar investor with US dollar liabilities, we have a home bias that makes sense — these are the deepest and most liquid capital markets in the world,” Meier said.
The New York City pension systems, which are collectively the third-largest public pension plan in the US, last carried out a major asset allocation review in 2023, which was implemented last year. Such reviews are normally carried out every three to five years.
“Enough has probably changed in terms of the outlook for the economy that we should probably think about a strategic asset allocation review at the end of the year,” Meier said, adding that he had not made any such changes yet because it was “still a little early” to digest the implications of Trump’s trade war.
Meier’s comments come after the US president has rocked markets in recent months by announcing a spate of tariffs, delays and partial climbdowns. In late May a court ruled he did not have the authority he relied on to impose most of the levies, a decision the White House has appealed.
Trump’s “big, beautiful” tax bill along with a recent Moody’s downgrade of the US’s credit rating has also brought the sustainability of America’s debt levels under renewed scrutiny and put pressure on US government borrowing costs.
“I do think that some of the announcements that have been made and the actions that have been taken are material . . . and this administration has a different communication style that lends itself to more uncertainty and more volatility that needs to be taken into consideration,” Meier said.
He added that ultimately tariffs “will have the impact of increasing inflation at least for a period of time and will probably dampen growth”.
At its last strategic asset allocation update, the funds increased their allocation to private markets following a change in New York state legislation that expanded their potential allocation to non-traditional assets, primarily alternative investments, from 25 per cent to 30 per cent.