Tech Stocks Fuel Chicago Police Pension’s 11.8% Return in 2023

Despite double-digit gains that raised the fund’s value to nearly $3 billion, the returns fell just short of the pension benchmark’s performance.

The Policemen’s Annuity and Benefit Fund of Chicago’s 11.8% return in 2023, raising the pension fund’s asset value to just under $3 billion. However, it fell just short of its benchmark’s 12.1% return.

The double-digit investment gain was led by the pension fund’s equity assets, which accounted for the portfolio’ largest allocation at more than 55% and were the top-performing asset class for the year ended Dec. 31. Despite an 18.89% return, the fund’s equities underperformed its benchmark by more than 300 basis points.

The pension fund’s top equity holdings include tech giants Apple and Microsoft at 2.9% each, followed by Amazon and NVIDIA at 1.6% and 1.2%, respectively, and Google parent company Alphabet at 1.0%. Semiconductor stocks were the top equity performers for the year as Mediatek and Intel returned 45.2% and 41.8%, respectively, for the fund, followed by Broadcom, which earned 35%. The fund’s holdings in Mexican bank Grupo Financiero Banorte and Samsung returned 27.5% and 20.2% respectively, while its stock in Amazon and Microsoft were up 19.5% and 19.3%, respectively.

The fund’s opportunistic credit portfolio returned 15.80%, beating its benchmark’s return of 12.34%, followed by fixed-income assets, which earned 7.22% and topped its benchmark’s 5.53% return.

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Total infrastructure assets had the greatest outperformance for the fund, returning 6.28% for the year, while its benchmark lost more than 8% during the same period. Hedge fund assets grew 4.84% for the year, which was 150 basis points short of its benchmark, while private debt – which had the largest underperformance – returned 3.10%, compared with its benchmark’s return of 8.20%. The pension fund’s real estate assets lost 2.41% for the year but outperformed its benchmark by nearly six percentage points.

As of the end of 2023, the pension fund’s asset allocation was 34.9% U.S. equity, 18% fixed income, 16.8% non-U.S. equity, 6.5% real estate, 5.2% hedge funds, 4.6% private equity, 3.8% infrastructure, 3.4% long/short equity, 3.3% opportunistic credit, 2.2% private debt, and 1.3% cash.

The pension fund reported three- and five-year annualized returns of 4.3% and 8.3%, respectively, compared with its benchmark’s returns of 4.4% and 8.0% over the same periods. It also registered annualized returns of 7.4% over seven years, equaling its benchmark, and a 10-year return of 6.4%, which just beat its benchmark’s 6.3% return.

Over the longer term, the fund reported a 15-year annualized return of 8.3%, ahead of its benchmark’s 7.8% return, and an 8.3% annualized return over the 40 years since its inception in 1984.