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Florida Retirement System Audit Forecasts Diminishing Future Returns

Managers, auditors split on 2019 rate of returns, which are less than the previous two years.

By Chris Butera

The Florida Retirement System performed well in 2018, but despite that, the reported figures suggest there are some choppy waters ahead.

The pension fund, which covers state, county, schools, and other government workers, saw an 8.9% return on investments in fiscal 2018. It now has $161 billion in assets under management, and is 84.3% funded, according to a Thursday report from the state Auditor General’s office.

The fund is inching closer to its pre-crisis days, when it was fully funded. The 2008 cataclysm heavily impacted its assets, as well as those of many other pension plans in the nation. However, there are a few signs in the current report that there could be some tough times on the horizon.

For one, managers and auditors are not on the same page when it comes to 2019’s return expectations, which are forecasted to be much lower than the returns seen over the previous two years (8.9% last year and 13.7% in 2017). The managers say the fund will return 7.4%, but the auditors think 7% is more likely.

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Additionally, the fund now has had more retirees than contributing members since 2015, and that number is only increasing. This will keep increasing its unfunded liability, now at $29 billion.

“The long-term financial health of all retirement plans is dependent upon several key items: future investment returns, contributions, and future benefit payments,” said the report. “Accordingly, collecting employer and employee contributions as well as earning the assumed long-term rate of return on its investments are essential components of the division’s funding plan to accumulate the assets needed to finance future retirement benefits.”

According to the report, the fund’s target allocations were 54% global equity, 18%  fixed income, 11% real estate, 10% private equity, 6% strategic investments, and 1% cash.

The Auditor General’s office could not be reached for comment.

Ash Williams, the Florida State Investment Board’s executive director and chief investment officer, was also unable to be reached for comment. The Florida Retirement System is one of the four pension funds overseen by the board.

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Home > News > Newsmakers > Largest Sovereign Wealth Fund Takes $3 Billion-Plus Hit on Apple Shares
Newsmakers

Largest Sovereign Wealth Fund Takes $3 Billion-Plus Hit on Apple Shares

The tech giant’s Q1 sales warning sends Norway’s Government Pension Fund Global’s near $10 billion investment for a loop. 

By Chris Butera

Apple’s revelations last week of souring sales have sent shockwaves across the markets, wiping out billions overnight from investors’ holdings—among them Norway’s gargantuan sovereign wealth fund.

The $1 trillion-plus Government Pension Fund Global, the largest institution of its kind, lost more than $3 billion on its investments in the tech giant. Since 2009, the fund has been authorized to invest up to 60% of its portfolio in international equities, making it the largest shareowner in Europe. In 2016, the fund owned more than 1% of all global stocks and currently owns about 2.33% of all European shares, according to news website CCN.

At the end of 2018’s third quarter, the Government Pension Fund Global owned approximately $9.6 billion in Apple shares. Following Apple CEO Tim Cook’s admission that first quarter sales for 2019 would be about $5 billion less than expected due to President Donald Trump’s trade war with China and the slowing of the Chinese economy, the tech stock plummeted. The Dow Jones Industrial Average lost more than 600 points alone on the news. The massive sovereign wealth fund’s Apple holdings currently sit at $6.29 billion.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook wrote. “In fact, most of our revenue shortfall to our guidance, and over 100% of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac, and iPad.”

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In response, analysts such as Morgan Stanley, Goldman Sachs, and UBS have cut their price targets for Apple shares, and others, such as Jeffries, have downgraded the company to a “hold.”

It is not known if the Government Pension Fund Global has sold any of its stake in Apple.

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