NYC Pension Funds Report 17.4% Gain as U.S. Stocks Soar

New York City’s five pensions reported a 17.4 percent gain on investments for the fiscal year ended June 30, propelled by growth in U.S. stocks, Comptroller Scott Stringer said.

Total assets of the funds for firefighters, police officers, teachers, school administrators and civil servants grew to $160.5 billion, the highest ever to end a fiscal year, Stringer said today in a statement.

“Any year in which the pension funds achieve double the assumed rate of return is a good one in my book,” Stringer said. The New York City funds need to average at least 7 percent a year to match their assumed rate of return. The rate is used to calculate how much the plans will need to cover benefits promised to members.

The growth of NYC’s pension assets show how many U.S. retirement funds have healed from the recession that ended in June 2009, buoyed by a resurgent stock market. The California Public Employees’ Retirement System, the largest U.S. pension, which reported an 18.4 percent gain. The California State Teachers’ Retirement System, the second-largest, returned 18.6 percent.

Over the past five years, New York’s pensions have an annualized rate of return of 13.4 percent, with a 10-year rate of 7.59 percent, Stringer said. The Democrat serves as the funds’ investment adviser, custodian and as a trustee.

Equities Blend

New York City’s pension funds had 40.5 of their assets in U.S. stocks and 17.1 percent in international equities as of May 31, according to the comptroller’s website. The Standard & Poor’s 500 Index of U.S. stocks gained 22 percent in the 12 months that ended June 30.

Assets of the 100 largest public-employee systems grew to $3.22 trillion as of March 31, the U.S. Census Bureau reported last month. Obligations to retirees exceeded assets by $1.3 trillion as of the first quarter, according to Federal Reserve data.

In May, Stringer hired Scott Evans as chief investment officer for the funds. Evans, who managed almost $500 billion at the TIAA-CREF retirement system, replaced Seema Hingorani.

Hingorani and her predecessor, Larry Schloss, expanded investments in hedge funds and junk bonds, and fired more than 40 investment firms for poor performance. The city funds farm out supervision of all their assets to investment firms at a cost of $472.5 million last year. New York employed 250 investment firms as of June 30, 2013.

The city funds had a combined 11.4 percent of assets in private equity, hedge funds, and real estate as of May 31. Stringer’s predecessor, John Liu, said these so-called alternative investments would diversify the pensions to guard against events such as the stock market collapse in 2008, reducing large swings in values.

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