State Treasurer Dale Folwell released the state pension returns for the first quarter of 2018 calling the returns flat, amid volatility in the stock market during the first part of the year.
Folwell said that over the first three months of the year, making up Quarter 1 (Q1) of the year, the state pension plan returned 0.2 percent. That rate of return took into account fees associated with the management of the state pension plan.
The state pension plan is nearly $100 billion and managed by the Treasurer’s office called the North Carolina Retirement Systems.
While Folwell is pleased with the work his investment team has made he said that in the long run there needs to be larger growth to remain sustainable.
“Our investment team has done a great job during a difficult first quarter,” Folwell said. “However, the fact remains that we spent more than $1.5 billion gross in benefits payments while producing little in investment gains. Those types of outflows without earnings are unsustainable in the long term.”
Folwell said that though North Carolina’s pension plan is one of the top five best funded in the country there needs to be reforms to bring about that sustainability the plan requires.
One such change is lowering the assumed rate of return on both the Teachers’ and State Employees’ Retirement Systems (TSERS) and the Local Governmental Employees’ Retirement Systems (LGERS), as approved by the Boards of Trustees for those plans.
Folwell said lowering the plan’s assumed rate of return from 7.2 percent to 7.0 percent allows for more realistic assumptions about the plan’s ability to achieve expected returns in the future.
“Despite strong returns in 2017, the pension plan hasn’t met its assumed rate of return on average for twenty years,” Folwell said. “We owe it to the General Assembly, taxpayers, public employees and future generations to be transparent and realistic about the true valuation of the pension plans.”
Folwell and his investment management team have been looking at more ways to save in the state’s pension plan, implementing cost saving measures on a rolling basis to increase dividends for the state plan.
During the first quarter of 2017, Folwell brought more of the state’s investments in house, saving more than $75 million in fees already since implementing the change.
Over the course of four years the change is expected to net more than $300 million in savings.
The North Carolina Retirement Systems provides retirement benefits and savings for more than 900,000 members, including teachers, firefighters, police officers, state and local government employees and other public workers.
The returns for the first quarter 2018 investments are broken down as such, reported net of all fees and expenses:
- Public equity, which makes up nearly 40 percent of the total fund, was flat at 0 percent
- Private equity rose 4.3 percent
- Non-Core Real Estate and Opportunistic Fixed Income gained 5.6 percent and 2.4 percent respectively
- The multi-strategy portfolio returned -.7 percent for the three-month period
- Inflation-sensitive and diversifier investments increased by 1.8 percent
- Investment-Grade Fixed Income was down – 1.7 percent