Kentucky Retirement Systems, Frankfort, returned a net -0.52% on its pension fund assets for the fiscal year ended June 30, below its benchmark return of 0.21%, said a performance report on its website.
Real estate returned 9.2% over the year, followed by private equity at 5.46%; fixed income, 4.76%; U.S. equity, 1.44%; real return, 1.13%; absolute return or hedge funds, -6.26%; and international equity, -8.47%
As of June 30, the pension fund had an asset allocation of 26.1% U.S. equity, 25.1% international equity, 13.7% fixed income (split evenly between global fixed income and credit), 10.2% absolute return, 10.1% private equity, 8.4% real return, 4.7% real estate, and the remainder in cash and miscellaneous.
For the three, five and 10 years ended June 30, the $10.8 billion pension fund returned an annualized 5.45%, 5.38% and 5.02%, respectively, slightly below its benchmark returns of 5.9%, 5.91% and 5.49%.
Minimal exposure to CCC-rated corporate bonds, which had a “tremendous run” over the past few months, and active U.S. equity managers that underperformed as a whole hindered the pension fund relative to its benchmark, said David Peden, chief investment officer, in a telephone interview.
While non-U.S. equity pulled the pension fund down on an absolute basis, the portfolio actually outperformed its benchmark by 125 basis points, Mr. Peden added.
KRS also administers a $4.2 billion insurance fund.