N.C. Retirement System Boasts of Funded Status

North Carolina’s Teachers’ and State Employees’ Retirement System (TSERS) reported a funded level of 90.4%, while the Local Governmental Employees’ Retirement System (LGERS) was 95.2% funded through Dec. 31, 2016, making the Tar Heel state one of the five highest-funded state pension plans in the US, according to S&P Global.

“We are very pleased with the valuations relative to our peers,” said North Carolina State Treasurer Dale Folwell in a statement. “However, given the fact that life expectancy is increasing and interest rates are at historic lows, we must focus on not just preserving and strengthening these plans, but sustaining them for the future as well.”

Annual valuations on the overall percentage of funding for each pension plan directly impact the amount of money employers must contribute. Each October, the boards of trustees receive valuations for each of the seven state-sponsored retirement, disability, or death plans managed by North Carolina’s Department of State Treasurer (DST).

“Even with our assumptions that in aggregate are more conservative, the North Carolina Retirement Systems continue to be well-funded relative to our peers,” said Steve Toole, executive director of the Retirement Systems, a division of DST.

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The DST said that the high funded status of TSERS and LGERS is a direct result of the state’s general assembly fully funding the recommended contribution requirements, assumptions that tend to be more conservative than other similar public systems, and a funding policy that aggressively pays down unfunded liabilities over a 12-year period.

“We’re thankful that the general assembly, through North Carolina taxpayers, has fully funded the pension plus millions more,” said Folwell.

Confirming North Carolina’s high funded status is a new report from S&P Global that says proactive management and funding discipline have placed the state among the five highest-funded state pension plans in the country. S&P Global gave the North Carolina Retirement Systems an AAA/Stable rating, citing the state’s ability to effectively manage pension liabilities over the long term.

“While the long-term outlook for most US state pensions remains sluggish, we believe that these five states’ exposure to weak market returns and growing pension costs are significantly limited and manageable, improving our view of their overall credit quality,” said S&P in its report, adding that North Carolina is “positioned to remain at very healthy funding ratios through strong funding discipline.”

Tags: Local Governmental Employees’ Retirement System, North Carolina’s Teachers’ and State Employees’ Retirement System, Pension, S&P Global

The total value of assets managed by the world’s largest 500 managers rose 5.8% to $81.2 trillion in 2016, according to a new report from Willis Towers Watson.

Assets under management (AUM) for North American managers increased 7.7% in 2016 to $47.4 trillion, while assets managed by European managers grew 2.8% to $25.8 trillion. Despite the rise in European AUM, UK-based managers’ assets fell for the second consecutive year, declining 4.5% in 2016 to $6.3 trillion.

According to the report, 78.4% of total assets in the survey are actively managed, however, that is down from 79.7% from the previous year as passive management’s share continues to rise.

“Whilst passive assets remain significantly smaller than actively managed assets, the proportion of passively managed assets has grown from 16.5% to 21.6% over the last five years alone,” said Luba Nikulina, global head of manager research at Willis Towers Watson, in a statement. “We expect that this trend will continue to put downward pressure on traditional fee structures, particularly amongst active managers seeking to remain competitive and to maximize value to investors.”

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The report also found that the 20 largest asset managers’ AUM increased 6.7% in 2016 to $34.3 trillion, which is also up more than 67% from 2008 when they oversaw $20.5 trillion in assets. The 20 largest managers’ share of total assets increased for the third consecutive year, rising to 42.3% by the end of 2016 from 41.9% in 2015. However, the bottom 250 managers experienced a greater growth rate in assets managed, increasing 7.3% over the year.

Equity assets made up 44.3% of the total assets, while fixed income assets comprised 34.4% for a total of 78.7%, which is an increase of 3% from 2015. Alternative assets saw a 5.1% increase by the end of 2016, while equities share rose 4.1% from the previous year.

“Alternatives continue to grow in popularity, with investors remaining under pressure to find effective means of diversification in an environment of lower expected returns from traditional asset classes,” said Nikulina. “We see this as linked to the growth in assets managed by managers in the bottom half of our list, suggesting that investors favor smaller investment houses with specialist investment skills.”

The report said BlackRock retained its position at the top of the manager rankings for the eighth year in a row. It also said the main gainers, by rank, in the top 50 during the past five years include Dimensional Fund Advisors, Affiliated Managers Group, Nuveen, New York Life Investments, and Schroder Investment Management.

“It is encouraging to see a return to growth in total global assets,” said Nikulina, “suggesting that managers are finding success in attracting investors towards innovative solutions to achieve superior risk-adjusted returns.”

Tags: BlackRock, Largest Asset Managers, Research, Willis Towers Watson