Tag: ai-CIO

Maryland State Retirement System Loses 3% in Fiscal Year 2022

Mary Pat Campbell

Lik: https://www.ai-cio.com/news/maryland-state-retirement-system-loses-3-in-fiscal-year-2022/

Graphic:

Excerpt:

The Maryland State Retirement and Pension System’s investment portfolio lost 2.97%, net of fees, for the fiscal year ending June 30, but beat its policy benchmark’s loss of 3.48%. As they have been for many pension funds, the results were a sharp turnaround from last year, when the MSRPS earned record returns of 26.7%.

….

Although the fund missed its new assumed actuarial rate of 6.8% for the fiscal year, which became effective July 1, the portfolio’s three-, five- and 10-year returns were 8.4%, 7.9% and 7.8%, respectively.

Author(s): Michael Katz

Publication Date: 17 Aug 2022

Publication Site: ai-CIO

NY Common to Review Net-Zero Readiness of Oil and Gas Firms

Mary Pat Campbell

Link: https://www.ai-cio.com/news/ny-common-to-review-net-zero-readiness-of-oil-and-gas-firms/?oly_enc_id=2359H8978023B3G

Excerpt:

The New York State Common Retirement Fund is evaluating 28 publicly traded oil and gas companies to determine if they are ready to transition to a low-carbon economy, according to a release from the state comptroller’s office.

The $272.1 billion pension fund is asking each company, which includes energy giants BP, Chevron, Exxon Mobil and Shell, to provide information on how prepared it is to transition to a net-zero economy.

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The assessment of the pension fund’s integrated oil and gas holdings is part of its broader review of energy sector investments that it believes face significant climate risk. When DiNapoli announced in late 2020 that the pension fund would transition its portfolio to net-zero by 2040, he said the process would include completing a review of energy sector investments within four years to assess transition readiness, as well as a divestment of companies that don’t meet its climate-related investment risk standards.

Less than two years into that review process, which has so far included an evaluation of shale oil and gas, oil sands and coal companies, the pension fund has decided to divest from 55 firms that it determined were not prepared to transition to a net-zero economy.

Author(s): Michael Katz

Publication Date: 15 Aug 2022

Publication Site: ai-CIO

NY State Pension Returns 9.5% in FY 2022, While NYC Pensions Lose 8.65%

Mary Pat Campbell

Link: https://www.ai-cio.com/news/ny-state-pension-returns-9-5-in-fy-2022-while-nyc-pensions-lose-8-65/

Excerpt:

The New York State Common Retirement Fund has reported a 9.51% investment return for fiscal year 2022, while the New York City Retirement System reported an annual preliminary loss of 8.65% among its five pension funds.

However, the fiscal year for the state’s pension ended March 31, while the city’s pension funds ended their fiscal year June 30, after a quarter during which global markets tumbled and the S&P 500 fell by more than 16%.

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The portfolio’s alternative investments buoyed the pension fund’s returns, which raised the portfolio’s asset value to $272.1 billion as of March 31. Private equity returned 37.57% for the year, while the fund’s real estate investments and real assets returned 27.4% and 16.12% respectively. The three asset classes account for nearly 24% of the portfolio’s total asset allocation. The pension fund recently reported that it had committed more than $3 billion in alternative investments during June alone.

The NYCRF had an asset allocation of 49.70% in publicly traded equities, 21.18% in cash, bonds and mortgages, 13.64% in private equity, 10.00% in real estate and real assets and 5.48% in credit, absolute return strategies and opportunistic alternatives. The fund’s long-term expected rate of return is 5.9%.

Author(s): Amy Resnick

Publication Date:

Publication Site: ai-CIO

Average Public Pension Assumed Rate of Return Hits 40-Year Low

Mary Pat Campbell

Link: https://www.ai-cio.com/news/average-public-pension-assumed-rate-of-return-hits-40-year-low/

Excerpt:

The average investment return rate assumption for U.S. public pension funds has fallen below 7.0%, to its lowest level in more than 40 years, according to the National Association of State Retirement Administrators.

Among the 131 funds that NASRA measured, more than half have reduced their investment return assumption since fiscal year 2020 as rising interest rates and other factors have contributed to more volatile investment returns. 

For the 30‐year period that ended in 2020, public pension funds accrued approximately $8.5 trillion in revenue, according to NASRA, of which $5.1 trillion, or 60%, came from investment earnings. Employer contributions accounted for $2.4 trillion, or 28%, and employee contributions totaled $1 trillion, or 12%. 

Author(s): Michael Katz

Publication Date: 1 Aug 2022

Publication Site: ai-CIO

Governor Moves to Bar Florida SBA From ESG Investing

Mary Pat Campbell

Link: https://www.ai-cio.com/news/governor-moves-to-bar-florida-sba-from-esg-investing/

Excerpt:

The latest anti-ESG onslaught from Republican state officials is Florida Governor Ron DeSantis’ campaign to forbid the Florida State Board of Administration from adopting environmental, social and governance investing tenets. At the moment, SBA doesn’t appear to be a devotee of ESG.

The governor, an outspoken conservative, plans to propose at an SBA meeting on August 15 that the body’s fiduciary duties must exclude ESG. “From Wall Street banks to massive asset managers and big tech companies, we have seen the corporate elite use their economic power to impose policies on the country that they could not achieve at the ballot box,” DeSantis said in a statement.

DeSantis, a possible GOP presidential contender in 2024, declared that “we are protecting Floridians from woke capital and asserting the authority of our constitutional system over ideological corporate power.” He also plans to push through legislation banning the SBA from making ESG-themed investments and requiring them to focus on maximizing returns.

Author(s): Larry Light

Publication Date: 5 Aug 2022

Publication Site: ai-CIO

Justice Department Ends Investigation of Pennsylvania PSERS

Mary Pat Campbell

Link: https://www.ai-cio.com/news/justice-department-ends-investigation-of-pennsylvania-psers/

Excerpt:

The Department of Justice has dropped its investigation into the Pennsylvania Public School Employees’ Retirement System, said Chris Santa Maria, chairman of the $75.9 billion pension fund’s board of trustees, in a statement. PSERS made no further comment on the matter.

The pension fund had been under investigation by the Justice Department since at least May of last year, when subpoenas indicated that the FBI and prosecutors were seeking evidence of kickbacks and bribes at PSERS.

The subpoenas were reportedly looking for information from the pension fund, its executive director, chief financial officer, chief auditing officer and deputy CIO. The court orders reportedly showed that the FBI and prosecutors were probing possible “honest services fraud” and wire fraud.

….

According to a report released earlier this year following an internal investigation, PSERS investment consultant Aon took responsibility for the accounting error. The report includes a letter from Aon to Grossman that said the firm had become aware of data corruption in some sub-composite market values, cashflows and returns for April 2015.

Aon attributed the data corruption to an error by an analyst in uploading net asset value and cashflow data into the performance system it uses. The company said the data corruption impacted “a few asset class composites” in the public markets.

Author(s): Michael Katz

Publication Date: 3 Aug 2022

Publication Site: ai-CIO

Canadian Pension Giant Makes Its First Foray Into Colombian Private Equity

Mary Pat Campbell

Link: https://www.ai-cio.com/news/canadian-pension-giant-makes-its-first-foray-into-colombian-private-equity/

Excerpt:

The C$539 billion ($431.7 billion) Canada Pension Plan Investment Board has invested $334 million to acquire a 19.3% stake in Colombia-based discount grocery store chain D1, formerly known as Koba Colombia. The deal marks the pension giant’s first direct private equity investment in the country.

D1, which first opened for business in 2009 and officially took on its new name last month, recently announced it has become Colombia’s main food retailer. Citing findings from Nielsen, the company said it had a 9.7% share in the retail market and a 74% share in the so-called “hard discount” sector at the end of 2021. D1 has over 2,000 stores and reported 2021 operating income of more than $10.9 billion, which was a 32% increase from 2020. It also said this year.

Author(s): Michael Katz

Publication Date: 14 July 2022

Publication Site: ai-CIO

SEC Adopts Amendments to Proxy Voting Advice Rules

Mary Pat Campbell

Link: https://www.ai-cio.com/news/sec-adopts-amendments-to-proxy-voting-advice-rules/

Excerpt:

The U.S. Securities and Exchange Commission Wednesday adopted amendments to its rules governing proxy voting advice, representing another step forward in what has been a fraught regulatory process.

SEC Chair Gary Gensler, in a statement said, the final amendments aim to avoid burdens on proxy voting advice businesses that may impair the timeliness and independence of their advice. The amendments also address misperceptions about liability standards applicable to proxy voting advice, Gensler says, while preserving investors’ confidence in the integrity of such advice.

“I am pleased to support these amendments because they address issues concerning the timeliness and independence of proxy voting advice, which would help to protect investors and facilitate shareholder democracy,” Gensler says. “It is critical that investors who are the clients of these proxy advisory firms are able to receive independent and timely advice.”

As outlined in a press release distributed after the vote by the SEC, Wednesday’s final amendments rescind two rules applicable to proxy voting advice businesses that the Commission adopted in 2020. Specifically, the final amendments rescind conditions to the availability of two exemptions from the proxy rules’ information and filing requirements on which proxy voting advice businesses often rely.

Author(s): John Manganaro

Publication Date: 14 July 2022

Publication Site: ai-CIO

PBGC Finalizes Rescue of Ailing Multiemployer Pension Plans

Mary Pat Campbell

Link: https://www.ai-cio.com/news/pbgc-finalizes-rescue-of-ailing-multiemployer-pension-plans/

Excerpt:

The Pension Benefit Guaranty Corporation, under the direction of the Biden administration, has published the final rule implementing the American Rescue Plan Act of 2021’s Special Financial Assistance program.

According to supporters of the program, the Special Financial Assistance program, which is already operating on an interim basis, will protect millions of workers in stressed multiemployer union pension plans who previously faced the possibility of significant cuts to their benefits.

….

Initially, the interim final rule applied a single rate of return included in the statute that is higher than could be expected for SFA funds given that they were required to be invested exclusively in safe, but low-return, investment-grade fixed-income products. The final rule uses two different rates of return for SFA and non-SFA assets, so that the interest rate for SFA assets is more realistic given the investment limitations on these funds.

Another change in the final rule allows up to 33% of SFA to be invested in return-seeking assets that are projected to allow plans to receive a higher rate of return on their investments than under the interim final rule, subject to certain protections. Namely, this portion of plans’ SFA funds generally must be invested in publicly traded assets on liquid markets to ensure responsible stewardship of federal funds. These return-seeking investments include equities, equity funds and bonds. The other 67% of SFA funds must be invested in investment-grade fixed-income products.

The third major change is meant to ensure plans can confidently restore both past and future benefits and enter 2051 with rising assets. PBGC designed the final rule to ensure that no “MPRA plan”—a group of fewer than 20 multiemployer plans that remained solvent by cutting benefits pursuant to the Multiemployer Pension Reform Act of 2014—was forced to choose between restoring its benefit payments to previous levels and remaining indefinitely solvent. Instead, the final rule ensures that all MPRA plans avoid this dilemma, supporting them with enough assistance so that these plans can both restore benefits and be projected to remain indefinitely solvent going into 2051.

According to PBGC leadership, these changes collectively ensure that all plans that receive SFA are projected to be solvent and pay full benefits through at least 2051.

Author(s): John Manganaro

Publication Date: 7 July 2022

Publication Site: ai-CIO

Ohio Teachers’ Pension Increases Alts and Fixed Income Targets, Decreases Public Equities

Mary Pat Campbell

Link: https://www.ai-cio.com/news/ohio-teachers-pension-increases-alts-and-fixed-income-targets-decreases-public-equities/

Excerpt:

The State Teachers’ Retirement Board of Ohio shifted its asset mix at its board meeting last week, announcing it will now target 26% of its assets to U.S. equities, down from 28%. It also decreased its international equity allocation to 22% from 23%. The fund increased its allocation to private equity to 9% from 7% and its allocation to fixed income to 17% from 16%.

The increase in private equity, which had record returns this past year, is part of a broader trend. STRS Ohio saw 29% returns in fiscal year 2021, in part driven by a 45% return on alternative assets. These returns were topped only by domestic equities, which returned 46.3% for the fund.

The pension plan is also beginning to share some of these returns with pension beneficiaries. At its board meeting last week, the pension approved a 3% one-time cost-of-living increase for beneficiaries who retired before June 1, 2018.  The 3% adjustment is still less than half of the Bureau of Labor Statistics’ official inflation calculation of 7% in 2021.

Author(s): Anna Gordon

Publication Date: 22 Mar 2022

Publication Site: ai-CIO

New Illinois Law Authorizes $1 Billion in Pension Obligation Bonds and Extends Buyout Option

Mary Pat Campbell

Link: https://www.ai-cio.com/news/new-illinois-law-authorizes-1-billion-in-pension-obligation-bonds-and-extends-buyout-option/

Excerpt:

Illinois Governor J. B. Pritzker signed into law House Bill 4292 last Thursday [May 5]. The bill extends state employees’ ability to exercise pension buyout options to June 2026, as opposed to the previous deadline of 2024. Buyout options allow pension recipients to take a lump sum of money now as opposed to waiting to retirement to receive the pension. The hope is that doing so could decrease the state’s struggling pensions’ unfunded future liabilities.

Illinois’ state budget for fiscal year 2023 also authorized an additional $500 million in payments to the state pension fund and $1 billion in pension obligation bonds. 

…..

Illinois’ pension funds are among the worst funded in the country. As of fiscal year 2021, the state’s pension plans were 46.5% funded, significantly lower than the national average of 72.8%, according to the National Association of State Retirement Administrators.

Author(s): Anna Gordon

Publication Date: 9 May 2022

Publication Site: ai-CIO

Court Rejects Legal Challenge to Illinois Pension Consolidation

Mary Pat Campbell

Link: https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/

Excerpt:

An Illinois Circuit Court judge has denied a lawsuit that sought to stop the consolidation of the state’s 650 firefighter and police officer pension funds, rejecting the plaintiff’s claims that a law enacting the move violated the state’s constitution.

In 2019, the Illinois General Assembly passed a bill that allows for the consolidation of 650 police and firefighter pensions in order to pool their funds into two statewide funds for investment purposes—one for police and one for firefighters. The move is intended to help improve the financial stability of the pension funds and ease pressure on local governments to raise taxes to fund those pensions.

However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. B. Pritzker, who signed the bill into law. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause.

The plaintiffs claimed that they had a contractual and enforceable right to exclusively manage and control their investment expenditures and income, including interest dividends, capital gains and other distributions on investments, which they said the consolidation infringed upon.

Author(s): Michael Katz

Publication Date: 27 May 2022

Publication Site: ai-CIO