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PA SERS Gets a Boost in Q1 2017 Earnings

The Pennsylvania-based pension fund trumps last year’s Q1 reports.

By Chris Butera

The Pennsylvania State Employees Retirement System (PA SERS)’s net-of-fees earnings produced a 3.7% return of almost $1 billion during the first quarter of 2017.

According to a news release, the fund generated a total gain of $989 million, way up from last year’s $176 million Q1 earnings.

The returns mostly came from global public equity, which delivered 6.9% of Q1s earnings. The runners up were fixed income and hedge funds, delivering 1.9% and 1.4% of Q1’s return. Private equity and cash produced only 0.6% and 0.2% of Q1 returns. No returns came from real estate.

According to SERS, “all returns are reported net of fees and alternative investments and real assets lag by one quarter.”

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In addition, the supplemental deferred compensation plan also saw assets rise to a record $3.2 billion.

The board also approved cash-funded commitments three private equity investments, which include up to $100 million to Apollo Investment Fund IX, LP. (focusing on distressed opportunities, corporate carve-outs, and opportunistic buyouts primarily in North America and including Western Europe), up to $100 million to CVC Capital Partners VII, LP (focusing on control and co-control buyouts in established upper middle market and large market global businesses primarily in Europe, and some in North America and the rest of the world), and up to $100 million to Insight Venture Partners X, LP (focusing on growth-stage software, software-enabled services and Internet companies).

 The investments will be “funded by cash subject to successful contract negotiations.”

Also approved was the Personnel Committee pay action recommendation, which will continue with consistent pay increases for management employees approved by the Governor’s Executive Board from July 1, 2017 through June 30, 2019. In addition, the board approved a 12-month extension of the Private Equity Consulting Agreement with StepStone Group LP, subject to successful contract negotiations.  

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Home > News > Alternatives > Coronado: China Key to Global Economy, Real Estate
Alternatives

Coronado: China Key to Global Economy, Real Estate

Economist also notes that US rate rise likely to be slow based on high levels of debt.

By Poonkulali Thangavelu

After having fueled a housing bubble, China is slamming on the brakes with new regulatory tightening coming out of the country almost every week.  Investors should watch China to see how things play out in this cycle, according to Julia Coronado, president of MacroPolicy Perspectives. Expansions don’t die of old age, but they often die from credit bubbles, she noted.

Speaking at the Rutgers Business School’s Center for Real Estate capital allocation conference in Short Hills, N.J., Coronado, noted that China is driving the global growth cycle, accounting for more than half of the growth directly, and also through the country’s impact on commodity prices. Thus, “The ebbs and flows aren’t coming from the US, they’re coming from China,” she said.

Recent Chinese growth has been driven by credit, and the “piper will have to be paid at some point” by slowing down, she said. When the country tried to rein in its credit in 2014 and 2015, it nearly ended up crashing the global economy. China is slamming on the brakes again, and the question is whether it can engineer a soft landing this time. The tailwind the world has experienced from China is going away and will become a headwind, said Coronado.

Although the US Federal Reserve is trying to crawl forward with its interest rate normalization, the bond markets are skeptical, Coronado noted, and she believes the bond markets are right. She doesn’t expect interest rates will go up materially in this global environment. As she sees it, the high levels of US debt will limit the ability of interest rates to rise, and this is good for real estate investors. “The choices are hard, there are no low-hanging fruit,” she noted. Economic policy uncertainty is on the rise in the US, and its also high in China and European countries.

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