Massachusetts pension fund yields drop 3%, but outperform market

With market conditions in the gutter, the Massachusetts pension fund took an arguably inevitable hit — but weathered the storm much better than most of the market.

In fiscal year 2022, which ended June 30, US stocks were down -10.5%. Developed international stocks fell -17.7%. Emerging Markets Equities -25.2%. Diversified bonds –10%. The popular well-diversified portfolio benchmark of a 60-40 mix of global stocks and bonds – 13.5%.

The Massachusetts pension fund fell from a relatively low -3% and outperformed its benchmark by 1.5%, according to Massachusetts Pension Reserves Investment Management (PRIM).

“We are pleased to report that during the weakest market since the global financial crisis more than 13 years ago, the fund (Pension Reserves Investment Trust) performed very well,” said Michael Trotsky, Executive Director of PRIM, during a committee meeting on Wednesday. .

The fund grew from $95.7 billion to $92.4 billion in fiscal 2022, remaining higher than any previous year. PRIM expects to compare favorably to other pension funds for the year, Trotsky said.

The fund has historically performed very well. The Massachusetts PRIT Fund is the only pension fund that the American Investment Council’s Annual Public Pensions Study has ranked in the top five for private equity portfolio performance each year the study was conducted. .

In 2021, as markets soared, the fund hit an all-time gross return of 30%, outperforming its benchmark by a record 9%.

“Strong performance in both bull and bear markets, in our view, is the mark of a very well constructed portfolio with skillful managers who have proven track records,” Trotsky said.

Trotsky explained that the fund’s resilience was due in large part to diversified investments in private equity, real estate, forest land and hedge funds, which “helped cushion the downturn in public markets.”

Private equity rose 27%, real estate rose 25%, Timberland – of which PRIM is one of the world’s largest owners – rose 11% and hedge funds were “essentially flat” during of the 2022 financial year, according to the slides from the PRIM meeting.

An unreported rise in inflation, lower consumer and business spending, and weakening corporate earnings are major risks that PRIM staff continue to monitor, Trotsky said.

There are encouraging signs in the market, Trotsky said, noting that for example, although the S&P 500 was down 10.6% for fiscal 2022, it rebounded 9.2% in July.

However, mounting crises continue to plague the economy, with the threat of recessions looming in the United States and around the world.

“No one can really accurately predict the future of the markets over a long period of time. So with a fund of our size, we don’t try,” Trotsky said. … “No matter how the future unfolds, I am convinced that the PRIT fund will perform well.”

Dolores W. Simon