NC Retirement Systems Returns 13.5% in 2017

Pension fund assets grew $9.2 billion to $98.3 billion.

North Carolina Retirement Systems’ pension plan reported gains of 13.5% for calendar year 2017, surpassing its benchmark of 12.8%, and raising its total asset value to $98.3 billion from $89.1 billion at the end of 2016.

The gains are more than double the 6.3% the pension fund earned in 2016.

Public equity, which makes up nearly 40% of the total fund, rose 24.4%, while its multi-strategy portfolio rose 13.6% for the year. Non-core real estate and private equity gained 12.4% and 12.0%, respectively, while inflation-sensitive and diversifier investments increased by 8.6%. Meanwhile, “opportunistic fixed income,” and investment-graded fixed income rose 7.1% and 4.4%, respectively. The figures are reported net of all fees and expenses.

“Although we’re very pleased with that,” said North Carolina Treasurer Dale Folwell of the returns in a video statement, “it’s important to realize that the pension plan has not achieved its 7.2% average rate of return the last 20 years.”

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The fund, which is the 10th largest public pension in the US, significantly reduced expenses in 2017. It said that during the first year of Folwell’s administration, fees paid to Wall Street investment managers were reduced by more than $60 million for a projected savings of $240 million over four years.

The fund also moved $100 million in passive indexing funds under in-house management in 2017 in order to further reduce fees, while maintaining performance as measured by the Russell Top 200 index strategy and the Russell Mid Cap index strategy.

The current asset allocation of the pension fund is 52.4% growth, 34% rates and liquidity, 11.7% inflation sensitive diversifiers, and 1.9% multi-strategy.

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Mercer: S&P 1500-Sponsored Pensions Up 3% in January

Discount rates up 18 basis points.

January saw a 3% rise for pension plans sponsored by S&P 1500 companies, bringing the aggregate funding ratio to 87%.

According to research from Mercer, positive equity markets and an increase in discount rates drove the $291 billion estimated aggregate deficit to shrink $84 billion from its $375 billion debt from December 2017. January equities received gains of 5.6% from the S&P 500 and 5% from the MSCI EAFE index. The discount rates measured by the Mercer Yield Curve increased to 3.74%, up 18 basis points from the end of 2017.

According to Mercer, the estimated aggregate assets to liabilities for the end of January were $1.99 trillion to $2.28 trillion, slightly more positive than the end of December, which saw $1.95 trillion in assets and liabilities of $2.33 trillion.

“The volatile markets of early 2018 underscore just how important risk management is for pension plans,” Matt McDaniel, a partner of Mercer’s US Wealth business, said in a statement. “January was a great month, driving funded status to a four-year high, and plan sponsors with timely execution on dynamic de-risking strategies were able to lock these gains in before the market decline in early February. Sponsors whose governance model doesn’t support systematic de-risking in real time saw these gains evaporate in days, and may continue to realize funded status volatility.”

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