R.I. pension fund misses internal benchmarks for FY, quarter

R.I. GENERAL Treasurer Seth Magaziner released investment performance data for the Employees' Retirement System of Rhode Island for the fiscal year and June quarter this week.  / PBN FILE PHOTO
R.I. GENERAL Treasurer Seth Magaziner released investment performance data for the Employees' Retirement System of Rhode Island for the fiscal year and June quarter this week. / PBN FILE PHOTO

(Updated 2:56 p.m.) PROVIDENCE – The state employee investment fund had a 2.2 percent return in the fiscal year that ended June 30, and a 0.4 percent return for the June quarter, falling short of internal benchmarks.
General Treasurer Seth Magaziner released investment performance data for the Employees’ Retirement System of Rhode Island this week for the fiscal year and the quarter ended June 30.
The rate of return for the fiscal year fell short of the internal benchmark of 2.47 percent, according to information from Magaziner’s office.
He said that after a “strong run” from mid-2009 through mid-2014, financial markets were more volatile in the 2015 fiscal year.
Falling commodity prices, the end of the Federal Reserve’s quantitative easing program, Greece’s future in the Eurozone and Chinese economic growth all made investors more cautious, he said.
The quarterly return also missed the internal benchmark of 0.54 percent. In the quarter, the retirement system’s strongest performing assets were private equity at 5.5 percent, real estate at 2.9 percent and equity hedge funds at 0.9 percent. The worst-performing asset classes were infrastructure (-5.9 percent) and master limited partnerships (MLPs) (-2.6 percent), both of which were affected by weakness in oil prices.
Magaziner said that he was pleased that Rhode Island’s portfolio “preserved value when debt and equity markets fell in the second quarter.”
“Performance was strong relative to our benchmarks. The financial markets remain volatile, and by minimizing downside during market selloffs we position our state’s investments to deliver strong appreciation over the long term,” Magaziner said.
He said that the Employees’ Retirement System aims to achieve long-term average annual performance of 7.5 percent. Over the last three years, it returned an average of 9.3 percent annually, and a return of 9.8 percent over the last five years.

Shana Autiello, a spokeswoman for Magaziner, explained that the 7.5 percent assumed rate of return is an actuarial assumption chosen by the retirement board that is used to project costs out over the next 30 years.
“It is not expected to be the goal every single year as markets will go up and down, but rather the average over the whole period of time,” she said.
Autiello said the internal benchmark is a goal that the State Investment Commission holds itself to for informational purposes month by month.
She said the goal is to be able to hold their managers accountable, noting that the overall internal benchmark is derived from the benchmark for each individual asset class.
More than 60,000 active and retired public employees are served by the Employees’ Retirement System. As of June 30, it had a total market value of $8 billion.

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