State pension falls 4.7 percent in first quarter
The state pension fund balance, which has rocketed upwards in recent years, took a 4.7 percent tumble during the first quarter, shedding $2.3 billion in asset value.
The fund's balance, stung by domestic equity investment losses, decreased to $51.4 billion after hitting $53.7 billion at the end of 2007, according to preliminary year-to-date numbers.
During a Pension Reserves Investment Management Board meeting on State Street, fund staffers attributed the decline to a "very difficult market environment" and said the pension fund's losses were far narrower than the market as a whole. The Standard & Poor's 500 index was down 10.3 percent last quarter.
Through the first nine months of the fiscal year, the pension fund, which is charged under state law with securing an 8.25 percent return each year, has lost 1.63 percent of its value. Staff members said it would take a "miraculous" turn of events for the fund to meets its growth targets by the end of this fiscal year.
The pension board, chaired by Treasurer Tim Cahill, last year voted to sweeten performance bonuses available to staff when the pension fund hits certain investment benchmarks. A board spokeswoman said it was too early to tell whether the performance bonuses would be triggered.
PRIM executive director Michael Travaglini disclosed that the fund had divested $164 million from 11 companies that do business with the Sudanese government, a process mandated under legislation signed into law in November. The companies on the list include Alcatel Lucent, Alstom, China Petroleum & Chemical, Lundin Petroleum, Malaysia Mining, MCSI Behar, PetroChina, Reliance Industries, Schlumberger, Total, and Wartsila.
The law requires PRIM to regularly update the list to determine whether other companies meet divestment criteria or whether companies on the current list change their practices to allow for renewed investment.
Travaglini, who has opposed divestment legislation, said the divestment requirements in the bill had been significantly watered down prior to its passage. "It could have been worse," he said. "The original legislation, at first ... had a much more significant number."
Supporters of the bill argued that divesting from companies that deal with the Sudanese government, widely acknowledged as a sponsor of genocide in its far-flung Darfur region, would send a message that Massachusetts opposed the mass killing. They also said that, although Massachusetts on its own would have little impact on the Sudanese government, the collective divestment of other states and countries would help apply pressure to the North African nation.
Travaglini continued to be openly critical of a bill set for a hearing Thursday that would require the pension fund to divest holdings from companies that do business with Iran.
"I'm not even going to get started," he said. "That's a much broader number in terms of impact."
(State House News Service)
