The $68.7 billion North Carolina Retirement Systems, Raleigh, is considering whether to shift some money out of bond investments to boost returns, its trustee said.
The pension, with more than 37% of its assets in bonds at the end of the first quarter, needs the extra income to meet its target annual return of 7.25%, said Janet Cowell, the state treasurer. She's the sole trustee for the fund, whose five-year return at the end of the quarter was an annualized 4.5%.
“We have a fairly long-duration bond portfolio that's been a wind at our back the last few years,” Ms. Cowell said in a telephone interview on Tuesday from Raleigh, the state capital. “As those higher yields expire it will be harder to reach the 7.25%, so we have a challenging investment climate ahead. We're looking to curb some of the bond exposure.”
States are searching for higher returns after a 38% decline in the Standard & Poor's 500 Index in 2008 helped open a $1 trillion gap between what public pensions have and what they owe future retirees, according to a February study by the Pew Center on the States, a Washington-based researcher. The S&P 500 rebounded 23% last year and is up about 4% in 2010.
The California Public Employees Retirement System, Sacrament, boosted its holdings of domestic and international equities to 65% of its $213.3 billion at the end of February from 53% a year earlier, it reported on Tuesday. The bond allocation fell to 24% from 27%, it said.