Massachusetts’ public employee pension plans that invest independently of the state’s Pension Reserves Investment Management Board returned a median 20.3% in 2009, 2.8 percentage points above the return of MassPRIM for the same time period, according to the Massachusetts Public Employee Retirement Administration Commission’s 2009 investment report.
Of the 103 public plans, 52 invested predominantly on their own in 2009, while the remaining 51 plans transferred assets to the Pension Reserves Investment Trust Fund, which is managed by Boston-based MassPRIM.
The report, on the PERAC website, said the PRIT fund “was hurt both by its below-average allocation to basic equities and also by its ample holdings of real estate and private equity, both of which lost about 7.3% as they continued their downward revaluation toward historical norms.”
The best-performing plans cited in the report had high allocations to emerging markets, which returned nearly 80% in 2009, and high-yield debt, which returned around 60%.
Also, the composite asset allocation for systems that invested predominantly on their own was 37.1% U.S. equity; 22% fixed income; 14.6% international equity; 5.6% real estate; 5.2% hedge funds; 4.2% opportunistic fixed income; 3.8% alternatives (private equity and venture capital); 2.9% emerging markets equity; 1.9% PRIT Core Fund; 1.2% balanced funds; 0.6% timber; and the remainder in cash.
The PRIT asset allocation was 21.4% international equity; 20.4% domestic equity; 12.2% core fixed income; 9.5% each in private equity and real estate; 6.5% value-added fixed income; 5.8% emerging markets equity; 5.5% portable alpha; 5% hedge funds; and the rest in timber/natural resources.
Bob Dennis, investment director of PERAC, said many of the independently managed funds maintained higher allocations to equities because they weren’t as quick as PRIT to get into alternative asset classes like private equity and real estate.
“Everything goes in cycles,” he said. “What works one or two years isn’t going to work every year.”
The report is available at http://www.mass.gov/perac/report/2009investmentreport.pdf.