Chicago Policemen's pension fund returns 10.6%, topping benchmark

Chicago Policemen’s Annuity & Benefit Fund posted a net return of 10.6% for the fiscal year ended Dec. 31.

The $3.3 billion pension fund’s return well exceeded its policy benchmark of 9.5% for the period, according to a performance report obtained through a Freedom of Information Act request.

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 Gabriel Roeder Smith calculated its funding ratio at 23.4% on an actuarial value basis as of Dec. 31, 2023, which was down from 23.8% a year earlier.

For the three, five and 10 years ended Dec. 31, the pension fund returned an annualized net 3.4%, 7.2% and 6.8%, respectively, above their respective benchmarks of 3.3%, 6.8% and 6.7%.

The pension fund had returned a net 11.8% for the fiscal year ended Dec. 31, 2023.

The slightly lower returns for the latest fiscal year reflected slightly lower index returns for equities and bonds, although the returns were still impressive. For the year ended Dec. 31, the Russell 3000 index and Bloomberg U.S. Aggregate Bond index returned 23.8% and 1.3%, respectively, compared with respective returns of 26% and 5.5% the previous year.

For the most recent fiscal year, the top-performing asset class was domestic equities, which returned a net 21.3% for the year ended Dec. 31 (below its benchmark return of 23.8%); followed by long/short equity, which returned a net 14.4% (well above its 5.4% benchmark); opportunistic credit, at a net 10.6% (8.6%); hedge funds, 8.3% (9.1%); cash, 6.1% (5.3%); international equities, 5.6% (5.5%); and fixed income, 2.6% (1.3%).

The performance report did not provide return information for the infrastructure, private debt, private equity or real estate asset classes.

As of Dec. 31, the pension fund’s actual allocation was 37.7% domestic equities, 17.1% fixed income, 15.6% international equities, 5.4% real estate, 5.3% private equity, 5% hedge funds, 3.9% infrastructure, 3.5% long/short equity, 3.3% opportunistic credit, 2% private debt and 1.2% cash.

The target allocation is 29.5% domestic equities, 19.5% international equities, 15% fixed income, 10% private equity, 7% real estate, 5% each opportunistic credit and private debt, 4% infrastructure, 3% hedge funds and 2% long/short equity.