Underperforming Alts Weigh Down New Hampshire Pension Returns

The New Hampshire Retirement System reported an 8.8% investment return for the fiscal year that ended June 30, which raised its asset value to $12.2 billion but missed its benchmark’s 11.9% return due in large part to its lagging alts investments.

The pension fund also reported three- and five-year returns of 3.4% and 7.7%, respectively, and 10- and 25-year returns of 7.0% and 6.3%, respectively.

As of the end of the fiscal year, the pension fund’s asset allocation had drifted from one year earlier, as well as from its target allocation. Compared with June 30, 2023, the NHRS allocation to domestic equities, fixed income, foreign equities and cash each rose, while its allocation to alternative investments and real estate declined.

For fiscal 2024, the pension fund reported an allocation of 32.28% domestic equities, 20.75% fixed income, 18.96% foreign equities, 18.77% alternative investments, 9.24% real estate and 1.61% cash. This compares with 30.36% domestic equity, 19.76% fixed income, 18.16% foreign equities, 19.56% alternative investments, 11.25% real estate and 0.90% cash as of the end of fiscal 2023. Meanwhile, its target allocation is 30% domestic equity, 25% fixed income, 20% foreign equities, 15% alternative investments and 10% real estate.

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Despite the portfolio’s underperformance, it benefitted from the reduction of its alts and real estate assets over the year, as its real estate portfolio registered a 7.2% loss, while its alts investments’ 5.20% gain far underperformed its benchmark’s 20.79% return.

For the fiscal year, the pension fund’s domestic equities and foreign equities returned 18.95% and 11.31%, respectively, falling short of their respective benchmarks’ returns of 23.13% and 11.62%. Fixed income returned 3.5%, edging out its benchmark by three basis points, while alternative investments’ 5.20% gain was left in the dust by its benchmark’s 20.79% return. Although the real estate portfolio lost 7.2%, it managed to easily beat its benchmark’s 9.99% loss. Finally, cash assets returned 5.48%, just ahead of the 5.40% registered by its benchmark.

It should be noted that the reported performance covers only one fiscal year, while NHRS investment decisions are made with a 30- to 50-year time horizon in mind.

“As long-term investors we know that we will see returns above and below our assumed rate of return in any given year,” NHRS Executive Director Jan Goodwin said in a statement. “Because investment results are smoothed on a five-year rolling average, no single fiscal year is recognized all at once, which helps stabilize employer contribution rates.”