2015 was a difficult fiscal year for pension funds. High volatility across global public and private markets hit hard at large pensions that invest heavily in main asset classes.
Average U.S. pension fund returned -0.08 percent in 2015, according to study by The Bank of New York Mellon Corp. Although pension funds are long-term investors who shouldn’t be swayed by one-year turmoil, the wide gaps between target and actual returns in 2015 can still be hard to digest.
“When you have a 30-year investment horizon, you can't worry about storms that blow through, but you are a human being and so, you do,” Christopher Ailman, chief investment officer At California State Teachers’ Retirement System (CalSTRS), told Trusted Insight in March.
CalSTRS’ $189 billion investment portfolio returned 4.8 percent in the fiscal year ended June 30, 2015, which was below its target of 7.5 percent.
“Given the current environment, we have launched a new asset allocation study to challenge, re-challenge and re-challenge again the long-term assumptions we have for different asset categories,” said Jonathan Grabel, chief investment officer of New Mexico Public Employees Retirement Association (PERA), which returned 1.9 percent in 2015, as opposed to the estimated 7.75 percent.
While pension funds have started rethinking their asset allocation strategies, changes are not guaranteed to happen overnight. “For an analogy, we're tanker ships, and to move our portfolios takes time. We know where the holes are; it just takes time to adjust,” said New Mexico PERA’s deputy CIO Jude Perez.
New Mexico PERA currently manages a total portfolio of $14.5 billion. It’s not crazy to imagine that fundamental changes can be even more daunting at mega-size pensions that manage hundreds of billions.
Trusted Insight compiled the 2015 return data of the ten largest pension plans in the United States (seven of which manage assets exceeding $100 billion). We also reported the preliminary or actual 2016 results for those that have released numbers. Looking at available data, things will most likely get worse before they get better.
1. The California Public Employees' Retirement System (CalPERS) - Public Employees’ Retirement Fund
AUM: $302 billion
CIO: Theodore Eliopoulos
2015 Return: 2.4% (as of 6/30/2015)
2016 Return: 0.61% (preliminary as of 6/30/2016)
2. The California State Teachers’ Retirement System (CalSTRS)
AUM: $188.7 billion
CIO: Christopher Ailman
2015 Return: 4.8% (as of 6/30/2015)
2016 Return: 1.4% (as of 6/30/2016)
3. New York State Common Retirement Fund
AUM: $178.1 billion
CIO: Vicki Fuller
2015 Return: 7.16% (as of 3/31/2015)
2016 Return: 0.19% (as of 3/31/2016)
4. New York City Retirement System (NYCERS)
AUM: $154 billion
CIO: Scott Evans
2015 Return: 3.11% (as of 6/30/2015)
6. The Teacher Retirement System of Texas (TRS)
AUM: $128.5 billion
CIO: Thomas Harris IV
2015 Return: -0.3% (as of 8/31/2015)
7. New York State Teachers' Retirement System (NYSTRS)
AUM: $109.7 billion
CIO: Thomas Lee
2015 Return: 5.2% (as of 6/30/2015)
8. Wisconsin Retirement System - Core Trust Funds
AUM: $87.7 billion
CIO: David Villa
2015 Return: -0.4% (as of 12/31/2015)
2016 Return: 4.4% (preliminary for six-month period ended 6/30/2016)
9. Ohio Public Employees Retirement System (OPERS)
AUM: $86.9 billion
CIO: Richard Shafer
2015 Return: -0.03% (12/31/2015)
10. North Carolina Retirement Systems
AUM: $86.7 billion
CIO: Kevin Sigrist
2015 Return: 5.9% (as of 3/31/2015)
2016 Return: -0.7% (as of 3/31/2016)
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