Connecticut Pension Funds Hit All-Time High

The Connecticut Retirement Plans and Trust Funds (CRPTF) has reported preliminary, unaudited investment returns of 14.2% for the fiscal year ending June 30, bringing its total net value to $32.4 billion, a new all-time fiscal year-end record.

“The 2017 fiscal year experienced substantial market uncertainty associated with the

impact of the Brexit referendum, the US presidential election and elections abroad,

global monetary policy shifts, rising interest rates, and re-energized global equity

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markets,” said Connecticut State Treasurer Denise Nappier in a statement. “Through all the volatility, our asset allocation strategy and asset manager performance proved resilient—fully capturing the market upswing and adding significant additional value.”

After paying fees and expenses, including $793 million of benefit payments in

excess of total contribution receipts, the overall portfolio grew by more than $3 billion in asset value during the year.

The two largest pension funds, the Teachers’ Retirement Fund (TERF) and the State

Employees’ Retirement Fund (SERF), returned 14.40% and 14.34%, respectively for the year. They each outperformed their benchmarks by 116 and 117 basis points, and easily outpaced their assumed rates of return of 8.0% for TERF and 6.9% for SERF.

The two funds represent 90% of the assets held by CRPTF. Meanwhile, the smaller Connecticut Municipal Employees’ Retirement System (CMERS) returned 13.10%, beating its benchmark by 103 basis points.

“By outperforming the actuarial investment return assumptions, the CRPTF’s gains will moderate the state’s actuarially recommended pension fund contributions for the fiscal year 2020/2021 biennial budget,” said Nappier. “Every additional investment dollar earned is one less tax dollar needed to meet the state’s pension benefit obligations and, therefore, available to support funding for critical state programs and services.”

The CRPTF’s three equity market funds, which represent 51% of its holdings, were the main reason for the gains. The Developed Markets International Stock Fund, the Emerging Markets International Stock Fund, and the Mutual Equity Fund returned 24.81%, 23.00%, and 19.26%, respectively.

Over the longer term, the five-year returns for TERF and SERF were 8.80% and 8.81%, which outperformed their benchmarks. However, the seven-year returns of 8.96% and 9.03% were slightly below their benchmarks.

In addition to TERF, SERF, and CMERS, the CRPTF is comprised of assets held on behalf of the Probate Court Retirement Fund, State Judges’ Retirement Fund, State’s Attorneys’ Retirement Fund, Soldiers’ Sailors’ & Marines’ Fund, Arts Endowment Fund, Agricultural College Fund; Ida Eaton Cotton Fund, Andrew C. Clark Fund, School Fund, Hopemead State Park Fund, Police & Fireman’s Survivors’ Benefit Fund, and State of Connecticut Other Post-Employment Benefits Trust Fund.

Tags: Denise Nappier, Employees’ Retirement Fund, Teachers’ Retirement Fund, The Connecticut Retirement Plans and Trust Funds

The Pennsylvania State Employees’ Retirement System (SERS) said its board has approved up to $250 million in new investments for the state’s pension system, and that it will be funded with cash.

Of the $250 million, up to $150 million will be allocated within SERS’ multi-strategy asset class to Glendon Opportunities Fund II, which focuses on non-control distressed credit and other special situation investments.

Up to $100 million will be invested within the private equity asset class, $50 million of which will be invested in Asia Alternatives Capital Partners V, LP, while the remaining $50 million will be put in Penn Asia Investors. SERS said the funds focus on primary, secondary, and direct co-investments throughout Asia, mainly in growth and buyout capital, with a minority share in venture capital and special situation investments.

In addition to the $250 million in new investments, the Pennsylvania SERS board also approved reallocating just over $1 billion within the portfolio. The reallocation includes approximately $249 million from fixed income, and $400 million of cash to the MCM Russell 3000 Index. It also includes approximately $358 million within the fixed-income portfolio to the PIMCO Core Bond (ex Treasury) portfolio.

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The board also announced that it hired Invesco Advisors, Inc., to act as the stable value fund program manager for the state’s voluntary $3 billion participant-funded deferred compensation program. A stable value fund is a relatively low-risk asset class that focuses on capital preservation and liquidity, while providing returns to participants.

Additionally, the board agreed to amend the general investment consultant contract with RVK to include its assistance with a search for a third-party administrator for both the deferred compensation program and the defined contribution plan to be operational by the beginning of 2019.

To provide time for the request for proposal process, the board also agreed to extend its contract with Empower for one year for third-party administration of the deferred compensation program.

The SERS board also announced it has received a report from Dilworth Paxson, the outside law firm retained by the system’s audit committee to review SERS-related information that arose in a recent federal court case.

“The firm’s review found no compliance violations with SERS’ existing laws, regulations, and policies,” said SERS, “concluding that SERS Investment Office and an outside consultant acted in full compliance with their statutory and ethical responsibilities.”

Tags: distressed credit, Pennsylvania State Employees Retirement System (SERS), Private Equity, SERS