People seem to be genuinely shocked by a new report out of New York City's Comptrollers Office. The report found that the city's public employee retirement fund pays big fees to Wall Street but gets little in return.

However much anyone is shocked, they really shouldn't be. That's because the high cost of hiring outside money managers to oversee the city's retirement assets was entirely predictable. As Bloomberg reported in 2013, New York City is "the only one of the 11 biggest U.S. public-worker pensions that refuses to manage any assets internally." That alone suggests that the city is paying disproportionately high fees compared with pensions that manage some or all of their funds in-house.

The highest cost investments the city has are its $9.72 billion in private equity and $3.34 billion in hedge funds. The $160 billion retirement system pays fees of more than $360 million a year to outside money managers. That's a big deal.

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But a big surprise? Not even close. For some years, city officials have considered bringing some of those pension fund assets in-house as a way to cut costs. Larry Schloss, the city pension fund's former chief investment officer, made that clear in his public statements. What's unclear is whether Scott Evans, the current chief investment officer for New York City's Bureau of Asset Management, shares his predecessor's views.

The hiring of Evans was telling. Before joining the city, he spent 27 years at TIAA-CREF retirement system, which manages the pensions for teachers, researchers and related fields. When Evans' hiring was announced almost a year ago, Comptroller Scott Stringer said Evans "has been an industry leader in finding innovative and low-cost waysto invest and fund retirements . . . We are moving this office forward by being smarter in our operations and implementing necessary reforms to the existing structure." Evans managed $500 billion in assets at TIAA-CREF. Bringing him to the city's pension fund could very well be a prelude to moving at least some of the fund's assets into an in-house management system.

Economies of scale are why large private companies sometimes decide to manage retirement assets internally. Big companies have large legal departments that can do a lot of less expensively than an outside law firm. Money managers who are on the payroll can cost less than outside managers who charge fees or commissions.

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There's a good chance that New York City's pension plan has been watching the industry leader, the California Public Employees Retirement System. During the past year, Calpers decided to ends its investments in hedge funds, citing their high costs, subpar returns and the challenge of overseeing those assets. Don't be surprised if the city's pension fund doesn't adopt similar changes.

Whether the city goes this route is undetermined at this point. But if it does make the transition to an internally managed system, allow me to offer a few words of advice, and a word of caution.

Proceed methodically and with deliberation. Create a task force to oversee the process. Speak with pension funds such as Calpers, the industry bellwether. Visit private firms and companies that manage large pools of assets on their own. Microsoft's treasury group very effectively manages $90 billion internally; perhaps Apple's Braeburn Capital might be willing to discuss how it allocates almost $200 billion. Visit New Jersey's pension fund to learn what to avoid (litigation, conflict of interest, terrible performance, high fees).

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This would be a significant change that is rife with potential pitfalls. Hot investment trends may be tempting today, but often lead to regrets tomorrow. It is very possible to create an internal system that is less efficient and more costly than the one now used.

Lowering fund management costs is a worthy goal, but moving the oversight apparatus in-house requires a deft touch and skillful managers. By all means, New York, pursue those goals -- just be careful.

Barry Ritholtz, a Bloomberg View columnist, is the founder of Ritholtz Wealth Management. He is a consultant at and former chief executive officer for FusionIQ, a quantitative research firm.