Connecticut, Montana Pensions Plan Asset-Liability Reviews

(August 16, 2010) — Connecticut Retirement Plans and Trust Funds (CRPTF) is planning to carry out an an asset allocation and liability study in 2011 that will delve into each of its six state pension funds, the $21.9 billion fund’s Chief Investment Officer Tim Corbett told ai5000.

The system produced an average net return of 12.88% for the fiscal year ended June 30, increasing in value by $1.5 billion and finishing the fiscal year with assets of $21.9 billion. “What drove the increase in return was the fact that our plan was so well-positioned and diversified even going into the downturn in late 2008 and early ’09, with about 10% in our liquidity fund,” he said, noting that during fiscal 2010, the fund’s four best-performing sectors — emerging market equities, high yield bonds, emerging market debt, and private equity portfolio — each returned between roughly 17% and 25%.

Corbett noted that the fund’s asset allocation liability study occurs on a predetermined schedule, designed to capture a market cycle, with the most recent study completed in 2006. “This next planned review is part of a very thoughtful, well planned process for establishing investment policy,” he stated.

The study will examine asset allocation within the State Employees’ Retirement Fund (SERF); Teachers’ Retirement Fund (TRF); Municipal Employees’ Retirement Fund (MERF); Probate Court Retirement Fund (PCRF); Judges’ Retirement Fund (JRF); State’s Attorneys’ Retirement Fund (SARF); and the Soldiers’ Sailors’ & Marines’ Fund (SSMF).

According to State Treasurer Denise Nappier, the study will be conducted early next year. At that point, Nappier’s department will consider adjusting the asset allocation of the six state funds which make up CRPTF.

“The one year investment return is a welcome recovery from the difficult market environment of the last several years and our pension funds’ related performance setbacks,” said Nappier, principal fiduciary of the funds, in a release. “While we still have a ways to go, it takes the sting out of the dismal returns of fiscal year 2009 and demonstrates the resiliency of our pension fund investment program.”

Separately, the Montana Board of Investments has also commissioned an asset-liability study, expected to be completed by mid-December, for the $2.5 billion Montana Teachers’ Retirement System. The board has allocated 2% to private equity timberland to hedge against inflation and to diversify its existing real estate allocation.

The study will be conducted by consultant R.V. Kuhns, who noted that the scheme’s old asset-liability study is four years old and in need of a makeover.