2 Connecticut pension funds selling investments to meet cash flow needs
By Robert Steyer | March 18, 2013 3:55 pm
The two largest public pension funds in the Connecticut Retirement Plans & Trust Funds, Hartford, will have to sell an estimated total of $427.8 million in investments by June 30 to offset a projected cash flow shortage, according to report by the state treasurer's office.
The $9.2 billion State Employees' Retirement Fund must sell an estimated $266.3 million in “core long-term public investments,” and the $14.6 billion Teachers' Retirement Fund must sell an estimated $161.5 million in similar investments, the report said.
Both pension funds “are projected to continue to have insufficient contributions and dividend and interest receipts to meet pension payrolls” for the 2013 fiscal year which ends June 30, Treasurer Denise Nappier said in a March 6 letter discussing the cash flow report. She is the principal fiduciary of the $26.1 billion Connecticut Retirement Plans & Trust Funds.
Ms. Nappier's letter and the cash flow report were presented March 13 to the state Investment Advisory Council, which advises the treasurer on pension-related investments.
“The cash flows are strategically managed to make sure that the state of Connecticut has the necessary funds to pay the retirement funds' obligations,” David Barrett, a spokesman for Ms. Nappier, wrote in an e-mail Monday. “Sales of investments — throughout the year and adhering to strategic planning — are spread across the Connecticut Retirement Plans & Trust Funds in a way that allows rebalancing to keep the integrity of the portfolio.”
Over a five-year period through the 2017 fiscal year, “higher pension contributions and slower projected growth in pension benefits payments are expected to eliminate” the shortfall for the employees' fund, Ms. Nappier wrote. However, the teachers' fund is projected to cover only an estimated 85% by the end of that period.
The teachers' fund had a net cash outflow of $172.2 million for the fiscal year that ended June 30, 2012, and the state employees' fund had a net cash outflow of $195.4 million for the same period. Mr. Barrett said investments were sold during the previous fiscal year to make up for the deficits.