Thursday, September 24, 2015

NJ Pension Funds Bad Year Confirmed

New Jersey's pension investments yield 4.16% for the fiscal year, missing the benchmark for solvency of system.  The estimates on the health of the pension system assume a 7.9% rate of return.

New Jersey's giant public worker pension system lost $2 billion in the fiscal year that ended in June as investment returns sagged to 4.16 percent, state investment officials said Wednesday.
And the volatile stock market this summer brought an even bigger hit to pensions.
The value of the fund was $79 billion at the end of the fiscal year in June, down from about $81 billion a year before. The value dropped to less than $76 billion by the end of August, the chairman of the State Investment Council said.
Last year, the investments returned 16.9 percent, and over the past five years the fund has yielded 10.81 percent.
"We've all known returns like that were unlikely to last forever," said Tom Byrne, chairman of the State Investment Council, said at a meeting Wednesday.
The fund's investments returned 4.16 percent in the fiscal year that ended in June, according to unaudited figures released Wednesday While that was higher than the 2.93 percent benchmark of what other investments returned in various markets, it fell short of the pension system's 7.9 percent long-term assumed rate of return.
The pensions system lost money because while the investments added about $3.2 billion, about $8 billion is distributed to retirees each year, Byrne said. It needs to earn 10 percent a year just to keep up.

In the past few years the state has been under more and more criticism for making alternative investments, ie, hedge fund investments. Critics say that the large fees, at least $600 million, are justified robbery.

According to Thomas Byrne, the head of the investments council, NJ's alternative investments actually performed well.

"The four best-performing asset categories for the fiscal year that recently ended were all part of the alternative investment program," he said. "Alternatives as a whole returned about 7.9 percent for the year, nearly double the returns we made elsewhere."
Seven investment categories performed better than the overall fund, and six of those are alternative investments, according to a Division of Investment report.
"Had we been 70 percent stocks and 30 percent bonds in the last five years, as some have advocated, our results would have been considerably worse," Byrne said.

New Jersey's pension debts verge on being unpayable, but no matter what, the Pension Crisis is going to affect New Jersey's education aid.

As I've said numerous times before, SFRA is unfundable. The state cannot make the aid distribution fair by making the pie larger and giving more money to the underaided districts.

The only economically viable solution to aid unfairness is REDISTRIBUTION.

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