Home > News > Pensions > Assets in State-Facilitated Retirement Plans Top $1B

PensionsAugust 18, 2023

Assets in State-Facilitated Retirement Plans Top $1B

Led by programs in California, Oregon and Illinois, the pace of savings growth in state plans is accelerating.

State-facilitated retirement savings programs have accumulated more than $1 billion in assets, as of July 31, according to data collected by the Center for Retirement Initiatives at Georgetown University.

The assets are held by eight of the 19 state programs, with the largest share in the programs run by California, Oregon and Illinois, each of which launched in 2018 or earlier, the center reports. There are also two city-sponsored programs in the U.S.

As of June 20, nine of the 19 state programs—including auto-IRA programs in California, Colorado, Connecticut, Illinois, Maryland, Oregon and Virginia and programs with different structures in Massachusetts and Washington state—are open to all eligible employers and workers in those states. The remaining 10 are in various stages of their development.

As the number of programs has grown across the country and programs have become more well established in early-adopter states, the programs’ asset growth is accelerating.

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“It took more than three years to hit $500 million in program assets, but only 13 months for programs to cross the $1 billion mark,” said Angela Antonelli, executive director of the CRI, in an emailed response to questions.

Antonelli said the programs, which give private sector employees access to tax-deferred retirement savings in their workplace, even if their employer does not sponsor a plan, “can be life changing.”

“Program participants report a greater sense of financial security, so even modest levels of savings in state programs likely contribute to improved financial wellness,” Antonelli wrote.

Research published this year has shown that in states that have made it mandatory for businesses to either utilize the state-run plan or offer an employer-sponsored plan, more employers are offering their own retirement plans, giving a wider swath of employees a chance to save for the future.

Additional research by the Pew Charitable Trusts found that state-facilitated retirement savings plans for private sector workers that do not have workplace plans may have a positive effect on the creation and retention of private plans.

As the largest state-sponsored plans continue to drive the lion’s share of asset growth in these programs, smaller state programs are coming online and also seeking ways to control costs, including partnerships such as the one announced this week by Maine and Colorado.

Antonelli says a partnership can also “significantly reduce the amount of time from adoption to launch. Maine will now be able to move to a pilot by this October and a program launch in January 2024, and it will move even more quickly for other states entering such partnerships in the future, reducing time from 18 to 24 months to a matter of just a few months.”

Tags: Angela Antonelli, CalSavers, Center for Retirement Initiatives, Delaware, Illinois Secure Choice, OregonSaves, private sector retirement savings, retirement savings plan

Home > News > Asset Allocation > Public Equities Propel 10% 1H Return for Norway’s Sovereign Wealth Fund

Asset Allocation August 18, 2023

Public Equities Propel 10% 1H Return for Norway’s Sovereign Wealth Fund

Following a weak 2022, the Government Pension Fund Global’s market value rose to $1.443 trillion at the end of June.

By Michael Katz

Strong equity gains helped propel Norway’s Government Pension Fund Global to a 10% return in the first half of 2023 to raise the sovereign wealth fund’s total market value to 15.3 trillion kroner (approximately $1.433 trillion).

Despite the robust return, the pension giant fell short of its benchmark’s return by 23 basis points.

After a weak 2022 (-14.1% overall return), the fund’s return on equity investments was 13.7% during the first half of this year, while its fixed-income investments returned 2.2%. Unlisted renewable energy infrastructure investments lost 6.5%, and unlisted real estate decreased 4.6%.

“The stock market has been very strong in the first half of the year, following a weak year in 2022,” Norges Bank Investment Management CEO Nicolai Tangen said in a release. “Especially technology stocks have seen significant growth, largely driven by the increased demand for new solutions in artificial intelligence.”

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As of the end of June, the GPFG portfolio’s asset allocation was 71.3% equities, 26.4% fixed income, 2.3% unlisted real estate and 0.1% unlisted renewable energy infrastructure.

The strongest returns within the pension fund’s equity portfolio in the first half of the year came from technology, consumer discretionary and industrial stocks, while energy had the weakest return. Tech firms returned 38.6%, which the pension fund attributed to strong demand for new AI solutions from the biggest internet, software and semiconductor companies.

Consumer discretionary was the second-strongest sector, returning 20.7%, as consumption and economic activity maintained their levels despite rising prices and interest rates. The pension fund also noted that the lifting of pandemic restrictions in China led to further optimism, especially among luxury goods stocks.

Industrials were the third-best performing sector with a 15% return, as strong growth in orders and increased demand outweighed recession fears. Energy companies returned only 0.4%, as prices for oil, gas and refined products fell back from their high levels of last year.

According to the pension fund, the main driver behind the losses to its unlisted real estate investments was the office sector, with U.S. investments in particular falling sharply during the first half; the U.S. office sector also negatively affected the Government Pension Fund Global’s listed portfolio.