Chicago Firemen pension fund returns 14.5% for fiscal year

Chicago Firemen's Annuity & Benefit Fund posted a gross return of 14.5% for the fiscal year ended Dec. 31.

The $1 billion pension fund's preliminary return exceeded its policy benchmark return of 14.4% for the period, according to an investment report on its website.

The double-digit returns for the year provided welcome news for one of the most severely underfunded pension plans in the nation. In its most recent actuarial valuation report for the pension plan, actuarial consultant Segal Group calculated its funding ratio as 20.8% on an actuarial value basis as of Dec. 31, 2022.

For the three, five and 10 years ended Dec. 31, the pension fund returned an annualized gross 4.1%, 8.9% and 6.7%, respectively, compared with their respective benchmarks of 4.4%, 9.1% and 6.6%.

The pension fund had returned a gross -14.2% for the fiscal year ended Dec. 31, 2022.

The reversal of the previous year's negative returns was likely due to market recoveries in both public equities and fixed income. For the year ended Dec. 31, the Russell 3000 index and Bloomberg U.S. Aggregate Bond index returned 26% and 5.5%, respectively, a dramatic turnaround from their respective returns of -19.2% and -13% the previous year.

By asset class, the pension fund's top performer for the fiscal year ended Dec. 31 was private credit, which returned a gross 24.5% (above its 14.5% benchmark), followed by international equities, which returned a gross 23.5% (15.6% benchmark); domestic equities, 20.8% (26%); fixed income, 6.7% (5.5%); cash, 5.3% (5.3%); private equity, 5% (7.5%); infrastructure, -0.2% (2.2%); real estate, -1.3% (-1.1%); and liquid diversifying, -7.4% (9.5%).

As of Dec. 31, the actual allocation was 36% domestic equities, 25.2% international equities, 22.3% fixed income, 7.2% real estate, 3.6% private equity, 2.9% infrastructure, 1.7% liquid diversifying, 0.8% private credit and 0.3% cash.

The targets are 33% domestic equities; 24% international equities; 22% fixed income; 8% real estate; 4% private equity; and 3% each infrastructure, liquid diversifying and private credit.