Home > News > Research > Florida State Pension Plan Returns 13.77%
Research

Florida State Pension Plan Returns 13.77%

Every asset class outperformed its benchmark, except private equity.

By Michael Katz

The $153.6 billion Florida Retirement System Pension Plan reported a 13.77% return on investments for the year ending on June 30, surpassing its benchmark of 12.96%, and easily beating last year’s return of 0.54%.

“We are always pleased to post double-digit returns, and this year is no exception,” said Ash Williams, CIO of the Florida State Board of Administration, according to Reuters.

“However, our focus has always been on the long-term sustainability of the plan, and we must acknowledge current dynamics in the financial markets moderating projected future returns.”

Total assets under management for the pension plan grew to $153.6 billion from $141.3 billion at the end of June 2016. The Pension Plan portfolio is currently divided into six asset classes:  Global Equity (57.8%); Fixed Income (17.9%);  Real Estate (8.9%);  Private Equity (6.4%); Strategic Investments (8.2%); and Cash & Cash Equivalents (0.8%).

Want the latest institutional investment industry
news and insights? Sign up for CIO newsletters.

The pension’s top performing asset class was global equity, which climbed 19.6% for the fiscal year to June 30, after losing 3.09% last year, and beating its benchmark of 19.06%. Private equity was the next strongest performing asset class, rising 18.27%, which was up from 6.21% in 2016, but below its benchmark of 22.06%.

Following private equity was the strategic investments asset class, which gained 9.75% for the fiscal year to June 30, compared to 1.84% last year, and above the benchmark of 6.6%. Real estate investments returned 8.73%, above the benchmark of 6.87%, but below last year’s return of 12.66%. Cash and cash equivalents gained 0.62%, compared to its benchmark of 0.54%, and last year’s return of 0.33%, while fixed-income investments edged 0.37% higher, compared to the benchmark, which lost 0.16%, and below last year’s performance of 4.35%

Tags: , , ,

Home > News > Research > Multi-Employer Pensions Divided Between Haves, Have Nots
Research

Multi-Employer Pensions Divided Between Haves, Have Nots

Reports take half-empty, half-full view of pension funding.

By Michael Katz

Two recent reports that studied the funding levels of multi-employer pension plans alternately offer a half-empty, half-full view of the current health of defined benefit plans. Together, they depict a landscape where many pension funds are struggling, yet most of them are doing fine.

Financial analysis and actuarial consulting firm Cheiron recently released a study that found that as many as 114 multiemployer pension plans covering nearly 1.3 million workers are underfunded by $36.4 billion, and are expected to become insolvent within the next 20 years.

At the same time, Segal Consulting’s most recent survey of multiemployer pension plans’ funded status shows that the majority (65%) of more than 200 multiemployer pension plans are more than 80% funded. The report also found that for all plans in the survey, which have a total of $100 billion in assets and cover 2.3 million participants, the average funded level is 87% percent.

“The headlines that focus on financially troubled multiemployer pension plans miss the point that the majority are healthy,” said Diane Gleave, senior vice president and actuary for Segal.

For more stories like this, sign up for the CIO Alert newsletter.

The Segal survey reported that since the financial crisis of 2008, the average funded percentage has been relatively stable, at between 85% and 89%. It also found that industries with a higher ratio of active to inactive participants tend to have better funding percentages. For example, it said that the entertainment industry, which on average has fewer than one inactive participant for each active participant, has an average funded level of 92%. However, the manufacturing industry, which has an average of 5.8 inactive participants for each active participant, has an average funded percentage of 79%.

On the other hand, the Cheiron report didn’t have quite as rosy a view of the health of multiemployer pension plans. It said that the multiemployer plans that reported that they are in “critical and declining” status have total assets of $43.5 billion against liabilities of $79.9 billion. And this doesn’t include plans that have already failed, or those that shut down because the employers withdrew from its pension.

The report also pointed out that the Pension Benefit Guaranty Corporation (PBGC) recently announced that it expects its insurance program for multiemployer pension plans will run out of money by the end of 2025. The PBGC covers 1,400 multiemployer pension plans with approximately 10 million unionized workers.

Cheiron said the underfunding of the troubled pension plans is due to the downturn of the stock market during the Great Recession, declining industries creating more retirees than workers, and employers exiting the plans either through bankruptcy or by withdrawing from the plans. It also found that just three of the pension plans account for $22.8 billion, or more than 62.5%, of the unfunded liability of the failing plans, and cover 603,000 participants, or more than 47% of the total workers and retirees covered by all of the declining multiemployer pension plans.

“Traditionally, participants in healthy multiemployer pension plans have been forced to pay for the guaranteed benefits of retirees and their families in failed plans,” said Joshua Davis, a principal consulting actuary at Cheiron. “If this happens again, it will push other plans into insolvency with terrible consequences for communities across the country.”

Tags: , , ,

«