Chicago Municipal Employees’ Annuity & Benefit Fund posted a net return of 10.9% for the fiscal year ended Dec. 31.
The $3.5 billion pension fund’s return fell just short of its policy benchmark return of 11% for the period, according to a performance report on its website.
The double-digit positive return likely provides welcome news for one of the most severely underfunded pension plans in the country. In its most recent actuarial valuation report for the pension plan, actuarial consultant Segal Group calculated its funding ratio at 22.8% 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 net 3.8%, 7.6% and 6%, respectively, compared with the respective benchmarks of 3.2%, 7.7% and 6.2%.
The pension fund returned a net -11.4% 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.
For the most recent fiscal year, the top-performing asset class was domestic equities, which returned a net 22.6% for the year ended Dec. 31 (below its benchmark return of 22.9%), which was followed by international equities at a net 15.9% (above its 15.6% benchmark); hedge funds, 14.3% (6.9%); fixed income, 7.8% (8.6%); and real estate, -18.6% (-7.9%).
As of Dec. 31, the pension fund’s actual allocation was 27.6% domestic equities, 21.7% fixed income, 17% international equities, 11.9% hedge funds, 10.3% real assets, 4% cash, 3.6% global low volatility, 2.2% private debt and 1.7% private equity.
The target allocation is 26% domestic equities, 22% fixed income, 17% international equities, 12% real assets, 10% hedge fund, 5% global low volatility and 4% each private debt and private equity.
