Rocky start to 2022 for Wilkes-Barre pension fund
WILKES-BARRE — The city’s aggregate pension fund’s bumpy ride will continue in the near term due to stock market volatility, inflation and the war in Ukraine, the fund’s senior consultant warned Wednesday.
Alex Goldsmith, a consultant at PFM Asset Management, briefed the board on the fund’s performance for the first quarter and assured them that despite market volatility, it could weather the ups and downs.
The fund for employees and retirees of the town of Wilkes-Barre started the year at $104.2 million, a record reached due to the injection of $22 million late last year of the proceeds of a bond agreement. But it lost $5.4 million for the quarter, leaving a balance of $95.5 million as of March 31.
Unlike in the past, the fund made up of the five plans for city employees and retirees does not need to sell assets to pay benefits, Goldsmith said. He paid about $3.2 million in benefits for the first quarter.
“It can withstand the volatility and as we expect it should normalize over the course of this year. Economically that’s what we expect,” Goldsmith said.
The big question yet to be answered is how the war in Ukraine will affect the markets. It’s already having social and psychological effects, Goldsmith said.
The effects of inflation are, however, evident. Goldsmith said PFM agreed with the Federal Reserve raising interest rates in an effort to control inflation which hit 8.3% in April compared to year-on-year.
“When the economy is otherwise healthy, like it is, jobs are healthy, like it is, but inflation is high, I mean, it’s the defined role of the Fed to step in and to act,” Goldsmith responded to a question from a board member. and firefighter Mark Lear.
Still, Goldsmith said PFM doesn’t believe there will be a recession and inflation will phase out in six to 12 months.
To hedge against inflation, the fund invested in commodities, real estate and remained in stocks, Goldsmith said.
Over the long term, the fund is expected to generate returns of between 7.4% and 7.5% and Goldsmith explained that PFM’s outlook is conservative.
“They always end up lower. They were lower than the real thing,” Goldsmith said.
The first quarter performance was negative 5.29%, but it showed a positive return of 3.57% compared to a year ago and 8.28% over a 10-year period. Since the fund’s inception in 1999, the return has been 6.11%, according to PFM.
In a year-over-year comparison, the fund posted a return on investment of $2.3 million, starting at $77.6 million with net inflows of $15.5 million and ending with a balance of $95.5 million, according to PFM.
Picking up on an issue he raised at city council meetings, Bob Kadluboski demanded answers from council on council members’ pensions.
“How do we count Wilkes-Barre City Council members to get their part-time service toward full-time pension?” Kadluboski asked.
Council attorney Carl Frank and council chairman Mayor George Brown directed Kadluboski to the state for answers.
“We have no control over that,” Frank said. You may disagree with this. You can oppose it. And you can drive to Harrisburg and tell the state about it. This is a state regulated matter under the 3rd class city code.
Brown said he would sit down with Kadluboski and City Council Speaker Beth Gilbert McBride, who is to call the meeting, to discuss the matter and provide him with an explanation.
Contact Jerry Lynott at 570-991-6120 or on Twitter @TLJerryLynott.