NYS Common Retirement Fund Cracks $200 Billion

In its third quarter results for fiscal 2018, the New York State Common Retirement Fund returned 4.12%, growing the fund to an estimated $209.1 billion.

“A strong equities market continued to provide solid returns on investments during the last three months of 2017,” New York State Comptroller Thomas P. DiNapoli said in a statement. “Notwithstanding recent volatility, we have welcomed the stock market’s nearly decade-long rise. Our foremost goal will always be to find stable, long-term returns that will continue to provide retirement security for the pension fund’s more than 1 million members, retirees and beneficiaries.”

According to the Comptroller’s office, the fund’s estimated value reflects the benefits paid out during the period ended December 31, 2017. The audited value as of the previous fiscal year was $192.4 billion.

As of December 31, nearly 60% of the fund’s assets were in publicly traded equities (40% domestic, 18.1% international). Cash, bonds, and mortgages had a 23.7% allocation. Private equity and real estate accounted for 7.6% and 6.5%, respectively. The remaining 4.1% of the portfolio was rounded out by absolute return strategies (2.6%), and opportunistic alternatives and real assets (1.5%).

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Recently, Di Napoli announced the fund’s ESG-fueled investment plan to shift equities in high-carbon stocks to low-carbon equities as part of an effort to move away from exposure to fossil fuels and other pollutants. Using a low-emissions index designed by Goldman Sachs Asset Management, the fund will replace the high-carbon stocks with tech stocks and environmentally friendly companies.

Tags: Fiscal 2018, New York, NYS Common Retirement Fund, Pension, Thomas P. DiNapoli

The new endowment tax that was included as part of the Tax Cuts and Jobs Act is already cutting into Harvard’s long-term investment strategy, said the university’s dean of the faculty of arts and sciences.

“It will have an impact on us,” said Michael Smith, according to The Harvard Crimson. “It is taking money we could’ve used for academic programs, could’ve used for financial aid, could’ve used for a bunch of other things we try to accomplish here.”

The 1.4% excise tax is being levied on the net investment income of private colleges and universities with an endowment greater than $500,000 per student. Harvard’s administrators estimated that the tax would have cost the university $43 million if it had applied to fiscal year 2017.

“I just don’t know how big of an impact this is going to be and how badly it’s going to hit us,” said Smith. “So we’re trying to do things in the short term to continue to innovate and push our programs forward. If you came in and asked me to commit a whole bunch of money for the next 10 years, I’d say, ‘come back and talk to me in six months.’”

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In December, Harvard University President Drew Faust said the tax “will constrain the resources that enable us to provide the financial aid that makes college more affordable and accessible.”

Harvard isn’t as fortunate as Kentucky’s Berea College, which had also been subject to the endowment tax. Berea is a liberal arts work college, with an endowment over $1 billion, and 1,600 undergraduates who don’t pay tuition, but work on campus to help pay their way. The school would have had to pay approximately $1 million a year, until US Senate Majority Leader Mitch McConnell of Kentucky came to its rescue. McConnell was successful in securing a provision to protect Berea College in the Bipartisan Budget Act.

The provision states that the excise tax on investment income of private colleges and universities is limited to institutions with at least 500 tuition-paying students. Because Berea’s students don’t pay tuition, the school is no longer subject to the tax.

Tags: Endowment Tax, Endowments, Harvard, Tax, Tax Cuts and Jobs Act of 2017