HARTFORD, CT — Preliminary investment returns show that Connecticut’s Retirement Plans and Trust Funds exceeded expectations in 2017.
The two largest of the six funds are the State Employees’ Retirement Fund, which saw returns of 14.34 percent, and the Teachers’ Retirement Fund, which saw returns of 14.40 percent. That exceeded the actuarial investment assumptions of 8 and 6.9 percent.
After combined net withdrawals of $793 million, including benefit payments, fees, and expenses, the pension funds jointly had a total value of approximately $32.4 billion as of June 30 — a net increase of $3 billion over the previous fiscal year.
State Treasurer Denise Nappier said Connecticut made gains despite the “market uncertainty associated with the impact of the BREXIT referendum, the U.S. presidential election and elections abroad, global monetary policy shifts, rising interest rates, and re-energized global equity markets.”
She said they were able to wade through the volatility.
“Outperforming the market, as reflected in returns above our benchmarks, is always gratifying, particularly for the taxpayers we serve during these tight fiscal times,” Nappier said.
The primary drivers of the returns were three equity market funds that represent 51 percent of trust fund holdings, all of which posted double-digit positive investment returns.
The Developed Markets International Stock Fund returned 24.81 percent; the Emerging Markets International Stock Fund returned 23.00 percent; and the Mutual Equity Fund (primarily domestic stocks) returned 19.26 percent. Importantly, each of these funds also surpassed their benchmarks by amounts ranging from 18 to 240 basis points.
Longer term, the five-year returns for the Teachers Retirement Fund and the State Employees retirement fund were 8.80 percent and 8.81 percent — outperforming their benchmarks by 24 and 23 basis points.
The seven-year returns were 8.96 percent and 9.03 percent, which slightly trailed their benchmarks. The returns for both periods exceeded the actuarial investment return assumptions in place during those times.
The state can use all the help it can get.
According to the last actuarial analysis, only 35.5 percent of the the State Employees Retirement System was funded. The period of the analysis covered through 2016.
It’s the first time in three decades the funding level of state employee pensions has fallen below 40 percent.