A soaring stock market should be a savior for public pension plans, but as an announcement earlier this week from the state comptroller makes clear, it is not. The state pension fund is now almost certain to fall short of its investment target for the third consecutive year, and New York City isn’t doing well either.
State Comptroller Thomas DiNapoli announced earlier this week that the $180 billion Common Retirement Fund achieved a 1.1% return in the October-December quarter, well below the results for the Dow Jones Industrial Average or the S&P 500. Results for the fund’s first and second quarters at 2% and 3.5% respectively were not good enough either. All three quarters have fallen well below the 7% gain the fund assumes it will achieve in order to have enough income to pay its future liabilities.
The problem is that while the Trump rally is boosting stocks, the plans for the new president are also pushing up long-term interest rates, producing losses in the bond portfolio that comprises about a quarter of the portfolio.
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New York City hasn’t posted December results yet, but through November the five funds were averaging a little under 4% for the fiscal year, again below its investment target.
The result will be that money will need to be diverted to pension contributions from other programs and the unfunded liability of both will grow. Fortunately for DiNapoli, state pension funds are in better financial shape than ones run by the city.
A soaring stock market should be a savior for public pension plans, but as an announcement earlier this week from the state comptroller makes clear, it is not. The state pension fund is now almost certain to fall short of its investment target for the third consecutive year, and New York City isn’t doing well either.
State Comptroller Thomas DiNapoli announced earlier this week that the $180 billion Common Retirement Fund achieved a 1.1% return in the October-December quarter, well below the results for the Dow Jones Industrial Average or the S&P 500. Results for the fund’s first and second quarters at 2% and 3.5% respectively were not good enough either. All three quarters have fallen well below the 7% gain the fund assumes it will achieve in order to have enough income to pay its future liabilities.
The problem is that while the Trump rally is boosting stocks, the plans for the new president are also pushing up long-term interest rates, producing losses in the bond portfolio that comprises about a quarter of the portfolio.
New York City hasn’t posted December results yet, but through November the five funds were averaging a little under 4% for the fiscal year, again below its investment target.
The result will be that money will need to be diverted to pension contributions from other programs and the unfunded liability of both will grow. Fortunately for DiNapoli, state pension funds are in better financial shape than ones run by the city.
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