North Carolina Retirement Systems, Raleigh, returned 9.52% for the fiscal year ended June 30, ahead of its 7.25% assumed rate of return and 8.4% market benchmark.
State Treasurer Janet Cowell, the sole trustee for the $80 billion system, reported Thursday that the return was driven by an 18.78% gain in equities over the fiscal year. The current allocation for equities is 46.38%.
The fixed-income portfolio, which represents 33.77% of current holdings, lost 0.75% over the fiscal year. Concerns about low returns for fixed income, which Ms. Cowell said in a statement “presents a long-term challenge,” led her to seek legislation approved July 26 by the Legislature that raises the alternatives allocation to 35% from the current 34%.
That legislation also increases limits in specific categories, with new caps of 10% on real estate, 8.5% on hedge funds, 8.75% on private equity and other private investments, and 7.5% on inflation protection and 7.5% on credit strategies. The measure becomes law August 26.
The added flexibility, Ms. Cowell said, will “take advantage of growth opportunities like credit and real estate.” For the fiscal year, the system's credit strategies gained 17.45%, real estate rose 10.9%, and other alternatives were up 5.81%. The inflation-protection portfolio dropped 2.95%. The current allocations are 4.12% credit strategies, 8.13% real estate, 3.65% other alternatives including private equity and 2.95% inflation protection, with the remainder in cash.