A candidate running to be New York state’s chief money manager says he would pull the state’s huge pension fund — the third largest in America — away from Wall Street firms.

Drew Warshaw is running for New York state comptroller, a job most voters would struggle to define but one that includes oversight of the state’s pension fund. If he unseats 18-year incumbent Thomas DiNapoli, Warshaw’s plan is to move much of its nearly $300 billion of investments into ultra-cheap, passive index funds.

The New York State and Local Retirement System has more than $90 billion invested in private equity, private credit, real estate, and other complex assets. All promise high returns — catnip for pension managers facing future payouts to retirees — but charge high fees, too.

The question facing New York and hundreds of other state and local pension funds, charitable endowments, universities, and government funds around the world: Are these high-priced managers worth the fees they’re charging?

Historically, yes. Since the 1970s, these “alternative” investments — so named because they aren’t publicly traded stocks or bonds — have provided an edge. But that’s been less true recently, as big tech stocks like Microsoft and Nvidia have soared. And now that alternative managers are chasing mom-and-pop investors, there are real questions about whether they can keep beating the broader market.

Warshaw doubts it’s worth trying, though he says he’ll dig into each fund. NYSLRS has fallen short of its assumed rate of return — the investing profits it believes it needs to meet its obligations to pensioners — in six of the past 15 years, according to data from the Boston College Center for Retirement Research.

“My starting position is ‘deeply skeptical’ and that these alternative asset classes have to prove their value,” Warshaw said in an interview. “With all this capital flowing into private markets, at some point you’re going to regress to the mean” and be left with subpar returns, after fees.

That was Brad Lander’s assumption when he became New York City’s comptroller in 2021, overseeing the city’s pension fund.

“I came in as a private-equity skeptic,” Lander said. He replaced the fund’s chief investor, who had a long history in private markets, with one from index giant State Street, and ordered a review. Instead, he ended up seeking permission from the state legislature to increase the fund’s exposure to private markets, which now accounts for 25% of its investments. “My team convinced me that, even with higher fees, we would be better off,” he said. “But it requires discipline. It’s a healthy debate to have.”