Funded Level for U.S. Public Pensions Slips to 73.7% in May

The 100 largest public plans saw an aggregate investment loss of 1% during the month.



The estimated funded level of the 100 largest U.S. public pension funds declined to 73.7% in May from 74.8% at the end of April, according to actuarial and consulting firm Milliman, which tracks public pension funded levels through its Milliman 100 Public Pension Funding Index (PPFI).

It was the eighth straight month when the plans’ funded ratio remained within the 70% to 75% range. Milliman noted that the relative stability of the funded levels is in sharp contrast to the period from March 31, 2020, through Sept. 30, 2022 when funded levels surged to 85.5% and then fell back to 69.8% before rising to their current levels.

In aggregate, the 100 plans in the index reported an investment loss of 1.0% during May, with individual plans’ returns ranging from a loss of 0.3% to a loss of 1.8%. As a result, the plans lost approximately $43 billion worth of market value. Combined with net negative cash flow of approximately $9 billion, the asset value of the Milliman 100 PPFI declined to $4.465 trillion at the end of the month from $4.517 trillion at the end of April. Meanwhile, the deficit between the estimated assets and liabilities increased to $1.590 trillion at the end of May from $1.524 trillion a month earlier.

The firm said the total pension liability of the public pension funds continues to grow, rising to an estimated $6.055 trillion at the end of May from $6.041 trillion the previous month. The firm also said that the minor market decline during May pushed one plan below the 90% funded mark, leaving 16 above this benchmark, compared with 17 the previous month. At the same time, the number of plans below 60% funded remained at 24.

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CalSTRS Winnows Candidate List for China Equities Manager

Pension giant is seeking a better way to implement its China equity exposure.



The California State Teachers’ Retirement System announced it has narrowed its list of possible fund managers for its China stock portfolio to 19, with no set number of managers to be selected.

“In August 2022, we issued a China RFP to find out if there may be a better way to implement our existing China equity exposure,” read an emailed statement from CalSTRS.

“Every investment manager we select will be required to follow CalSTRS’ ESG risk factors when making investment decisions,” the pension fund stated. “A dedicated China manager could provide more specialized expertise on the ESG aspects of the China market compared to a broad global emerging markets approach.”

According to the pension fund, placement in the pool of remaining candidates does not guarantee a manager will receive an allocation, and there could be no allocation.

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“Actual allocation size would be determined based on the needs of the CalSTRS Global Equity Portfolio, quality and capabilities of the pool manager(s), and overall attractiveness of the market at the time of investment,” read the statement.

When it issued the RFP last year, CalSTRS announced plans to establish three investment strategy categories targeting China, according to the RFP published on its website, Reuters reported. Two of the three would focus on greater China equities and onshore Chinese stocks, while the third would be benchmarked to the MSCI China Index.

 

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