Wilshire: City, County Pension Systems’ Funded Status Grew by More than 4% in 2017

Shortfalls decline by $22.7 billion from 2016.

The funding ratio of 107 city and county retirement systems increased by more than 4 percentage points in 2017, to 71% from 67%, reports Wilshire Consulting.

“Robust investment returns and contributions also drove asset values higher for the year,” said Ned McGuire, a managing director and a member of Wilshire’s pension risk solutions group. Wilshire also found that 93% of plans in the study “have market value of assets less than pension liabilities or are underfunded,” McGuire said.

The firm also found that this growth reversed two years of declines. Systems saw a $22.7 billion decrease in shortfalls, from $233.3 billion to $210.6 billion. 

The diminishing shortfalls are a result of an average boost in assets values by more than 10%, growing from $464 billion in 2016 to $514.8 billion in 2017. The value is the highest since Wilshire began conducting its annual report on city and county retirement systems and their funding levels and asset allocations in 2002.

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A lot of this has to do with pension plans lowering their discount rates, a growing trend in the space. Almost half of the plans in the report have lowered their rates between

5.13% and 8.50%, an average of 7.25%. McGuire said it is “down 25 basis points from last year.”

The average city and county pension portfolios allocate 64.3% to equities, which includes real estate and private equity. They also allocate 24.7% to fixed income. The last 11% goes to other assets, such as cash and infrastructure.

While funding in these pension systems advanced, the average liabilities grew as well, from $697.3 billion in 2016 to $725.4 billion in 2017.

Source: Wilshire Consulting

Of these 107 pension systems, 96 of them reported their actuarial values on or after June 30, 2017.


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Dartmouth Endowment Returns 12.2% in 2018

US, private equities help propel portfolio to a record-high market value of $5.5 billion.

Dartmouth College’s endowment reported its second straight year of double-digit gains as its investment portfolio returned 12.2% for the fiscal year ending June 30, to raise its total asset value to an all-time high of $5.5 billion.

The endowment earned $591 million in net investment gains, with gifts and other net transfers adding another $183 million. The spending distribution from the endowment was $237 million, which is approximately 25% of operating revenues for the fiscal year.

“Portfolio gains were driven by robust US equity markets combined with strong venture capital and private equity returns,” Alice Ruth, Dartmouth’s CIO, said in a release. “Dartmouth’s endowment is fortunate to partner with a roster of top-tier investment managers who add tremendous value.”

It was Ruth’s first full year as CIO, having assumed her role as head of the investment team in March 2017. In fiscal year 2017, the endowment generated an investment return of 14.6% to bring its asset value to a then-record $4.96 billion. It took in $630 million in net investment gains, with an additional $77 million in gifts and other net transfers last year.

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The endowment also reported a five-, 10-, and 20-year annualized returns of 10.6%, 7.6%, and 9.8%, respectively.

Despite having the second-smallest endowment in the Ivy League next to Brown University, Dartmouth has had among the top-performing investment portfolios of any of the elite universities in recent years. According to investment research firm Markov Processes International, Dartmouth has been among the top-four performing Ivy League endowments five out of the previous six years.

At the end of the 2017 fiscal year, the endowment’s asset allocation was 37.8% in global equities, 24.9% in hedge funds, 18.4% in venture capital and private equity, 7.5% in fixed income and cash, 7.1% in natural resources, and 4.3% in real estate.

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