Pension Fund Reaches $50 Billion Mark

Continues Climb From '08 Disaster

MARCH 2013 VOICE: A strong investment earnings last year, 2012, of 13.82%, has pushed the Commonwealth’s Pension Reserves Investment Trust (PRIT) Fund’s value over the $50 billion mark for the first time since 2007, when its peak value was $53.7 billion.

The recovery since Year 2008, a disasterous market year’s loss of -29.5 billion, which plunged the fund’s value to $37.8 billion has been a steady process with three of the past four years showing double-digit returns bringing the new value to $51.97 billion.

Year 2011, a flat year with 0.15 percent earnings, helped convince the Legislature and Governor to extend the full-funding target year from 2026 to 2040, a much more realistic date.

Although gains in the Fund’s earnings since 1985, its inception year, show an annualized investment return of 9.56%, the most recent valuation by the Public Employee Retirement Administration Commission (PERAC) adjusted the unfunded liability of the state and teachers fund to $21.6 billion, up from the previous figure of $18.6 billion.

This liability has been the result of the inability of the state to maintain a more robust appropriation to the fund within the constraints of the state budget each year, plus increased draw-downs to meet retired state and teacher pension payments.

Leading the way in last year’s earnings was PRIT’s global equity fund with a return of 17.54%. Global equity constitutes 44 percent of the total fund. The Pension Reserves Investment Management  (PRIM) Board, which manages the PRIT Fund, has gradually reduced the Fund’s exposure to equities (stocks) which can have wide market swings, such as what happened in 2008.

Forty-two local retirement systems (participating systems) have placed all of their funds in PRIT for management. These systems will show approximately the same returns as the state and teachers (Commonwealth Fund) within PRIT. The majority of remaining local systems utilize PRIT as a “purchasing” vehicle, chosing certain investments in which to place funds, resulting in lower managment fees.