Connecticut Retirement Plans & Trust Funds, Hartford, returned a net 0.35% for the fiscal year ended June 30.
This includes a 1.15% return for the Municipal Employees' Retirement Fund, which outperformed its benchmark return of 0.77%.
The state's two largest pension funds, the $15.5 billion Teachers' Retirement Fund and the $10.6 billion State Employees' Retirement Fund, posted annual returns of 0.26% and 0.25%, respectively, for the fiscal year, vs. their investment benchmarks of -0.06% and -0.01%, respectively.
“We're always pleased when we beat our benchmarks,” Denise Nappier, state treasurer and principal fiduciary of the pension funds, said in a news release Monday. “This low level of absolute performance is consistent with our view that markets have moved into a financial environment unlikely to yield the robust returns of the past few years.”
Longer term, the five-year returns for TERF and SERF were 5.71% and 5.74%, trailing the funds' actuarial return assumptions of 8% each. While the seven-year returns were 8.75% for TERF and 8.83% for SERF, the 10-year returns are 5.25% and 5.14%, respectively.
For the fiscal year ended June 30, real estate returned 11.51% and private investments returned 8.87%. The lowest performing asset classes were developed markets international equity at -7.09% and the emerging markets equity at -7.15%. Meanwhile, emerging market debt returned 6.01%; core fixed income, 3.46%; inflation linked bonds, 2.29%; mutual equity, 1.75%; liquidity, 0.68%; high-yield debt, -0.31%; and alternatives, -5.32%. Alternatives includes hedge funds, while private investments focuses on private equity.
“We need to right-size investment return assumptions for TERF and SERF, lowering them to conform with the mediocre forecast for capital market performance going forward,” Ms. Nappier said.
She added: “It is imperative that the retirement boards, along with the appointed and elected officials, do what is necessary to get the financial house of the state's pension funds in order. And that must begin with adopting realistic investment return assumptions.”
Together, TERF and SERF represent 90% of the total $29.1 billion assets.