Large public pension plans that were more heavily weighted toward U.S. equities than international stocks found themselves seeing double-digit returns well above their benchmarks in the fiscal year ended June 30.
Also, plans that had sophisticated programs in alternatives also experienced strong returns.
"U.S. equities did much better than non-U.S. equities this past fiscal year," said Thomas H. Shingler, a senior vice president at Callan LLC's fund sponsor consulting office in Summit, N.J. "If you were a plan that had a lot more U.S. equities than non-U.S., that was going to help you."
"Growth-oriented assets like private equity and real estate (also) would've helped," Mr. Shingler added.
Following a year in which double-digit returns reigned supreme, the median one-year return as of June 30 of the 50 plans tracked by Pensions & Investments through Sept. 12 was 8.94%. Callan's data show a similar figure: Based on 93 public plans that have at least $1 billion, the median return was 8.68%.
Only seven plans posted double-digit returns in the most recent year, following a year where every plan tracked by P&I but one exceeded 10%.
Longer term, for the three- and five-year periods ended June 30, most plans' annualized returns ranged from 3.7% to 9.35% and 7% to 9.93%, respectively. Median annualized returns for the respective periods were 7.4% and 8.45%.
For the 10 and 20 years ended June 30, P&I's return tracker showed median annualized returns of 6.77%, and 6.5%, respectively. By comparison, median returns for the five and 10 years ended June 30, 2017, were 8.9% and 5.4%, respectively.
The median five-, 10- and 15-year returns of large public plans as of June 30 as calculated by Callan were 8.51%, 6.7% and 7.75%, respectively.
Still, none of the plans in the most recent period experienced negative annual returns. The $778 million Austin (Texas) Police Retirement System had one of the lower returns at 7.3% for the year ended June 30, trailing its 9.6% benchmark return.
Pattie Featherston, executive director of the Austin police fund, attributed the plan's performance to several investments within its large allocation to alternative assets that underperformed. The pension fund's asset allocation as of June 30 included 8.8% real estate and 2.8% timber.
The pension fund "has taken a number of steps to redesign the … investment portfolio over the past five years in response to returns that were below expectations," Ms. Featherston said in an email.
This includes increasing its exposure to liquid markets, lowering fees by investing in more U.S. equity index funds, removing timber from its portfolio, repositioning its private equity portfolio and redesigning its allocation to real estate.