A Greenwich Associates study found that municipal pension plan officials expect their investment portfolios to outperform the market by 146 basis points on an annual basis over the next five years — an unrealistic expectation, according to Greenwich consultant Rodger Smith. “Few individual investment managers have ever generated 100 bps of annual alpha on a consistent basis,” Mr. Smith said in a news release, adding that a fund would have to shift “a big chunk of assets” to alternative investments to approach the 146 bps mark.
The most recent Greenwich Associates U.S. Investment Management Research study found the average funding ratio of public pension funds in the U.S. increased to 87% in 2007 from 86% in 2006. State funds saw average funding ratios increase to 85% from 79% while municipal fund funding ratios declined to 87% from 89% over the same period.
