<!-- Swiftype Variables -->

Pension Funds

North Carolina to press on lower rate of return, more in-house indexing

State aims to top $13 billion in U.S. passive equities in-house by year-end

North Carolina Treasurer Dale Folwell is recommending the North Carolina Retirement Systems, Raleigh, lower its assumed rate of return to 7% from the current 7.25%, he said on a press call Tuesday.

Mr. Folwell is the sole trustee of the $98 billion pension fund, which lowered its rate to 7.25% from 7.5% last year. The boards of the system's two main pension funds, for teachers and government employees, will vote on the change at their April 26 meetings.

Because employer contributions will have to go up if rates of return are lowered, "we are trying to smooth out the funding ... over five years," Mr. Folwell said on the call.

Mr. Folwell also provided an update of the retirement system's initiative, launched in November, to manage passive domestic equity investments in-house. The system now is investing $4 billion in-house, and "is on track to exceed $13 billion by the end of the year. We are staging it and we are doing it proportional," he said.

As of March 31, BlackRock (BLK) managed $6.9 billion and Piedmont Investment Advisors, $2.6 billion, in indexed assets for the North Carolina systems.

Of the $4 billion now internally managed, $2.25 billion came from a BlackRock Russell 1000 index strategy, $1.25 billion from a Piedmont Russell Top 200 index strategy and about $400 million from a BlackRock Russell Midcap Value index portfolio.

As of March 31, the internal domestic passive equity portfolio had $2.9 billion benchmarked to the Russell Top 200, $670 million to the Russell Midcap Core and $398 million to the Russell Midcap Value indexes.

"We've come a long way in a year. Our focus a year from now will probably be on what other types of investing in-house we can do," Mr. Folwell said.