Pension fund posts first loss in 5 years
But state remains in top tier nationwide
The state pension fund did it again.
The agency that runs the retirement fund for state employees and retirees said yesterday its investment returns for the most recent fiscal year put it in the top tier of public pension funds nationwide. It achieved that by managing to lose less money than other funds.
The Massachusetts fund recorded a 1.8 percent loss for the 12-month period that ended June 30, and for much of that time the fund was earning money until investment markets worldwide fell steeply in the last month.
"We are proud in a very difficult market to have held our own," said state Treasurer Timothy P. Cahill, who chairs the board that manages the $50.6 billion fund. "I would have given my right arm to have positive numbers."
This is the first time in five years that the Pension Reserves Investment Trust Fund registered negative returns, Cahill said. The fund's performance was pulled down by poor returns in two of its 10 asset classes - domestic and international stocks, down 15 percent and 9 percent, re spectively.
The board compared its losses to the Standard & Poor's 500 index, which was down 13.47 percent for the same period. Meanwhile, the median return of its peer group of public funds greater than $1 billion was a 4.36 percent decline, a fund press release said.
"Our relative performance compared to our peers and the markets continues to be strong," said Michael Travaglini, the board's executive director. "The problem in the short term is that it is still negative numbers."
The trust outperformed other public pension funds - including those in California, New Jersey, and New Mexico - because of its high build up in alternative investments, officials said, including hedge funds, high yield bonds, timber, and commodities.
Private equity assets went up 19 percent, timber 23 percent, and real estate 5.19 percent.
"Those types of investments offset as much as we could the downturn in US and international stock markets," Cahill said.
According to the most recent Trust Universe Comparison Service rankings, the fund's 2008 performance was better than 80 percent of comparable funds and in the top percentile over a 10-year period. The results will be presented to the pension fund's board tomorrow.
"We aren't going to jump up and down and pop champagne bottles," said Travaglini. "Clearly we think it is an example where our asset allocation helps us prevent losses during difficult markets."
Jenifer B. McKim can be reached at jmckim@globe.com.
