NC State Pensions Record Positive 7.6% One Year Return

July 25, 2003 (PLANSPONSOR.com) - Allocations in - and hefty returns of - bond investments helped North Carolina's state pension funds chalk up their first positive annual return since 2000.

The 7.6% gain noted in the seven retirement systems managed by State Treasurer Richard Moore for the year ending June 30 managed to best benchmark returns of 6.8% for its portfolio and helped bring the funds back to even with three years ago.   This comes after declines of 4.3% in 2002 and 2.4% in 2001, according to an Associated Press report.

“I haven’t been able to say that since I was the treasurer,” Moore said at a meeting of the trustee board for the seven retirement systems. “We have investment returns – not losses – returns.”

Moore credited the recovery to strict requirements his office has placed on allocating portions of the $55.7 billion in pension fund holdings, which help pay out retirement benefits largely to 470,000 state employees and teachers.
  Among those allocations and returns:

  • Stocks – 51% of the portfolio, 0.5% return
  • Bonds – 45% of the portfolio, 15.7% return
  • Real estate and alternative investments – 4% of the portfolio, 2% and -5.8% return, respectively.

In addition to nice returns among their bond investments, Moore also said the allocation requirement the funds placed on themselves allowed the state to reap returns during the recent stock market rally.   Among them, the funds exchanged large-capitalization stocks for shares of smaller companies that saw a bit of a boom as of late.


 

Track Record


Despite the lengthy bear market, the investment portfolio still met the benchmark overall return for the past three years at 0.1% – that would equal a $56 million return given the current asset total.

Moore also pointed out that the positive three-year return is notable given that some state governments are being forced to borrow money or raise their contribution considerably to pay retirement benefits. “We’re probably the only pension fund in America that had both positive returns for the past three years and is fully funded,” Moore said.

Among those states that looked to their pension funds for state budget concerns was North Carolina. However, the state’s General Assembly has already started paying back the $130 million that Governor Mike Easley withheld earlier this decade to balance the budget (See  Sharing The Pain ).   Additionally, the Assembly pledged $154 million next year to go into the state pension funds after contributing $26.5 million to the retirement system this fiscal year.

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