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N.J. pension fund lost money on investments last year

Thursday, September 29, 2016   (0 Comments)
Share | 09/29/16

The fiscal year that ended in June was a rough one for New Jersey's public employee pension fund as it lost nearly 1 percent on its investments, state officials reported Wednesday. The market value of the pension fund was $72.9 billion as of June 30, according to the Division of Investment, compared with $79 billion the same time last year. Investment officials described the fiscal year as a challenging one in which the fund's performance lagged as compared to other pension funds, as well as the benchmark the state holds itself up against.

"The one-year period ending on June 30th was a challenging and disappointing one for most investors," said Christopher McDonough, head of the Division of Investment. Tom Byrne, chairman of the State Investment Council, likewise described fiscal year 2016 as "an incredibly difficult investment environment." "You cannot expect outsize returns in an environment with such low interest rates and with equity markets at valuations that are high relative to historical data," Byrne said at the State Investment Council meeting Wednesday.

Officials reported the fund lost 0.87 percent in the fiscal year that ended in June, based on unaudited figures. Investment returns in the years prior were 4.16 percent, and 16.9 percent in the year before that. The public worker pension funds' returns last year were among the worst of large public pension funds — those with at least $10 billion in assets, according to data from the division. Real estate and private equity were the funds' strongest asset classes, while overall returns were dragged down by investments in domestic equities, non-U.S. developed markets and emerging markets.

Maintaining a health pension fund depends on, among other factors, generating at least a 7.9 percent return rate over the long term. Officials stressed Wednesday that the fund still beats other large pension funds over the long term. Over the past six years, the fund has outperformed than 7.9 percent assumption rate, returning an additional $3.6 billion to the fund, McDonough said. Byrne noted that the current fiscal year, which began July 1, is already off to a better start with a return of 2.5 percent in the first two months.

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