As inflation and tight labor markets create uncertainty in the year ahead, the state pension fund closed the calendar year in December at a record high of $104.3 billion. and recorded the fourth-largest annual gain in its history, pensions officials reported on Tuesday.
Pension Reserve Investment Management executive director Michael Trotsky said the pension fund, which pays retirement benefits to state employees and teachers, grew 20.1% after fees in 2021, to a gain of $17.4 billion.
The fund’s investment performance exceeded forecasts by more than 8%, or about $7 billion, eclipsing the previous record of 4% in 1999.
“It was the strongest outperformance in our entire history,” Trotsky said.
The 2021 performance report was delivered during a meeting of PRIM’s investment committee on Tuesday. The meeting was chaired by Treasurer Deb Goldberg, who announced on Monday that her father, former Stop & Shop president Avram Goldberg, had passed away.
The committee observed a minute’s silence for Goldberg’s father, whom Trotsky called “a legendary and highly respected man”.
“It’s amazing that you had the strength to be with us today,” Trotsky told Goldberg.
The good news about the fund’s performance comes amid what Trotsky described as a period of “high volatility” in markets in January caused by inflation, tight labor markets and disruptions in supply chains. .
The Federal Reserve is considering four or five interest rate hikes over the coming year, but pension officials said they don’t believe economic conditions will support that course by the time the Fed arrives. to the third rate hike.
Trotsky said state pension officials believe problems with the supply chain could resolve themselves and that the usual slowdown in demand for goods and services that accompanies a “bear market” is not there. Given these and other labor trends, the Board has not changed its long-term inflation forecast and considers the Industrials, Energy and Materials markets to be strong. and capable of guiding investors through difficult times.
“The Fed won’t be able to put this economy into a recession, so it’s still pretty positive overall,” Trotsky said, referring to analysis by investment committee chair Constance Everson, chief executive. of the Capital Markets Outlook Group, who was unable to attend the meeting.
The committee voted unanimously to make a change to its asset allocation to start 2022, recommending a 1% increase in assets invested in private equity. The fund currently has 16.6% private equity investments, and if approved by the board, the new allocation strategy would allow up to 18% to be invested in this class.
The strategy would withdraw assets from its global equity investments, with the range of this slice of the pension fund‘s portfolio reduced from 34% to 44%. PRIM’s full board of directors meets on February 17
Private equity was the fund’s “number one asset class” in 2021, according to Trotsky, growing 66.2%, followed by real estate and global equities. Core fixed income investments were the weakest, according to the committee.
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