Dallas Police & Fire Pension System returned a net -12.6% for the fiscal year ended Dec. 31, said the $2.8 billion retirement system's annual report released Friday.
Public defined benefit plans in MSCI's InvestorForce universe returned a median net -0.4%, by comparison, the report noted.
Global natural resources posted the highest return at 11% below that portfolio's custom benchmark return of 13.4%; followed by cash and short-term investments at 1.3%; global public equity, -0.7% (vs. its -4.9% benchmark return); global asset allocation -4.7% (vs. 5.8%); global infrastructure -4.7% (vs. 5.7%); global fixed income, -6.8% (vs. -2.6%); global private equity, -20.2% (vs. 3.4%); and global real estate, -31.7% (vs. 14.7%).
“Real estate performance was adversely impacted by changes in the estimated fair value of certain development stage properties, as well as declines in the estimated enterprise value of certain real estate related business ventures which were previously included in the private equity asset class and reclassified in 2015 to the real estate asset class due to the high correlation of the nature of the business to the real estate industry,” the report stated. At the same time, “private equity performance continued to be adversely impacted by exposure to the energy sector as well as changes in estimates of enterprise values of certain business ventures, but fund holdings in retail, particularly food and food service, performed relatively well,” according to the report.
For the three, five and 10 years ended Dec. 31, the retirement system returned an annualized -0.7%, 1% and 2.7%, respectively. During the same periods, the InvestorForce public defined benefit plan universe returned an annualized net 6.8%, 6.4% and 5.4%, respectively.
As of Dec. 31, the system had an actual asset allocation of 23.5% real estate (vs. its 15% target), 15.3% global private equity (vs. 15%), 15% global public equity (vs. 15%), 13.9% global fixed income (vs. 15%), 13.2% global asset allocation (vs. 20%), 9.6% global natural resources (vs. 10%), 6.7% global infrastructure (vs. 10%) and the remainder in cash and short-term investments.
In March, the retirement system board approved a new target asset allocation, which included increases to public equity and fixed income and decreases to private equity and real estate.
As of Jan. 1, the retirement system's regular pension plan had a funding ratio of 45.1%, down from the year earlier 63.8%. The decline was driven by negative actuarial investment experience and revised actuarial assumptions, said Kelly Gottschalk, executive director, in an e-mail.
Unless changes are made to the system's benefit provisions or member or city contribution rates, the plan could become insolvent in 2030, actuary Segal Consulting noted in a July 21 report to the pension fund board.
Also as of Jan. 1, the retirement system's supplemental DB plan had a funding ratio of 45.8% down from 51.2% a year earlier.
