The Colorado Public Employees Retirement Association (PERA) returned a dismal -3.5% in 2018, its latest annual report shows.

That’s not to say the poor returns were a surprise. The Colorado plan’s benchmark was -3.6%. This year’s results bring its 10-year performance average to 8.8%.

The yearly review, published Friday by the $49.2 billion plan, shows it lost most of its money from global equities after last year’s bumpy stock market ride—no thanks to President Donald Trump’s trade war with China and anxiety over the Federal Reserve’s interest rate hikes. The Colorado PERA suffered -9.1% in the global equities asset class.

Bonds also weren’t great, but remained essentially flat, returning -0.1% (the benchmark was 0.1%).

Private markets saved the fund from an even worse showing. Real estate was the big winner, reaping 11.1% as it sped past its 7.9% benchmark. And although private equity also did well, at 7.6%, it fell short of the fund’s benchmark, 10.2%.

Colorado PERA’s opportunity fund also did well with a 5.6% return, beating its 2.2% benchmark, followed by cash and short-term investments, which only beat its 1.9% benchmark by 10 basis points, at 2%.

The rough year also caused the plan to fall behind schedule on its 30-year full funding path, which aims for a 100% funded status by 2047. But under a new law, anytime the plan’s investment results are either ahead or behind the 30-year funding target, employer and employee contributions are adjusted down or up, as well as cost-of-living adjusts. To bring the plan in line, member and employer contributions will automatically rise by 0.5%, but the annual cost-of-living increases for beneficiaries will instead decline by 0.25%.

The automatic adjustment reforms, which the legislature passed last year, will take effect July 1. The plan is currently 59.8% funded, according to its website.

Timothy M. O’Brien, the fund’s board of trustees chairman, said legislative changes “are working as intended” to help with funding. “We understand that the reduction in benefits and increase in contributions are difficult for our members and retirees,” he said, adding that the changes are necessary for the fund’s long-term sustainability.

These reforms mean that the adjustments had to kick in the cover the spotty 2018 returns, which displeases plan members. If things went well for the Colorado pension fund, it would instead be cutting its contributions instead of raising them.

The state contribution is also programmed to increase by up to $20 million under the new law, but the PERA will not be evoking that clause.

The fund’s asset mix was 53.4% global equities, 24% fixed income, 9.6% real estate, 8.8% private equity, 3.6% opportunity fund portfolio, and 0.6% short-term investments and cash at the end of December.

The plan returned 18.1% in 2017.

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Tags: Colorado, Colorado PERA, Pension, Pension Reform, Returns