New York City Retirement Systems posted a net return of 10% for the fiscal year ended June 30, well above the 7% assumed rate of return, Brad Lander, the city comptroller and fiduciary of the five pension funds in the system, announced Aug. 1.
The aggregate net return was 8% for the fiscal year ended June 30, 2023.
Aggregate assets rose to $274.4 billion for the fiscal year ended June 30, compared to $253.2 billion for the fiscal year ended June 30, 2023. Audited return and asset data will be published in September.
“Despite the economic challenges of the past few years, our strategic investment partnerships and careful portfolio management delivered strong returns for New York City’s pension funds and great savings for the city this year,” Lander said in a news release.
“Our ability to outperform last year’s 8.0% net return reflects the hard work of our talented Bureau of Asset Management team and the resilience and foresight of their investment approach,” he added.
Net returns for each of the five independent pension funds within the system were clustered around 10%, ranging from 9.9% for the New York City Employees’ Retirement System to 10.6% for the New York City Board of Education Retirement System.
“After several years of unprecedented global economic disruption, I'm pleased with the progress of the net returns we achieved as the markets continued their recovery,” Steven Meier, the pension systems’ CIO, said in the release.
“However, as we plan for fiscal year 2025, we must remain prudent and focused on recommending tailored investment opportunities that can ensure strong, consistent returns for years to come,” Meier added. “We will work diligently to support long-term growth while upholding our fiduciary duty.”
In aggregate, the pension system had an average net return of 2.8% for the three years ended June 30, 2024; a five-year net return of 7.4%; a seven-year return of 7.5%; and a 10-year return of 7%, the release said.
As of June 30, the aggregate allocation was approximately 42% in public equities, 32% in public fixed income, and 26% in alternatives, the news release said.
Among 13 asset categories, the best performers were U.S. equity (up 23%), emerging markets equity (up 15.1%) and alternative credit (up 12.3%). The worst performers were private real estate (down7.1%), treasury inflation protected securities (up 2.7%) and core fixed income (up 2.8%).
A report accompanying the financial results noted that the “disappointing” performance in private real estate “was largely driven by continued challenges in the commercial office subsector, as the market addresses tenant needs, and overcapacity as pandemic remote work protocols continue to be endorsed by many public and private employers in the U.S.”
Among selected other alternatives' allocations, infrastructure provided a “respectable” net return of 10.3% and private equity produced a 5.1% net return.
U.S. equity represented the largest AUM allocation (26.8%), followed by core fixed income (24.5%) and international equity excluding U.S. and emerging markets (10.4%).
“Although not all asset classes delivered positive outcomes and performance relative to expectations, the overall result underscores the benefits of diversification and the portfolio resiliency achieved through owning a mix of uncorrelated investments across a range of public and private/alternative market asset classes and strategies,” said the report by the comptroller’s office.
“As long-term investors, we seek to achieve our target rate of return over an extended period, recognizing that the retirement benefits earned and promised to plan participants and beneficiaries stretch well into the future,” the report said.
The combined funding ratio for the five pension funds within the city system was 83%, based on the latest data of June 30, 2023. “The percentage will be updated later this year by the City Actuary,” the comptroller's report said. “The contributions set by the City Actuary put the (city system) on the path to achieve 100% funding by 2032.”
