New York state's pension assets slip after meager first quarter returns

[August 15, 2015]  By Edward Krudy
 
 NEW YORK (Reuters) - Assets at New York state's retirement fund, the third largest public pension fund in the nation, fell by $2 billion in the first quarter of its fiscal year as meager investment returns failed to keep pace with money paid out in benefits and fees.

The fund returned 0.52 percent during the quarter, which ended on June 30, but its estimated value dropped to $182.5 billion compared to a record $184.5 billion as of March 31, according to a report from the state's comptroller on Friday.

The weak year for financial markets so far highlights the difficulty the plan could have in achieving the 7.5 percent annual investment return that it needs over the long-term in order to have enough money to pay out the benefits it promises to retirees.

The fund aims to guarantee retirement security for over a million public workers in the state, including city employees, police and firefighters.

"The first quarter presented a challenging investment climate," state Comptroller Thomas DiNapoli said. "Nevertheless, New York's pension fund remains strong and well-positioned for the future with a smart, long-term investment strategy."

Local employers pay contributions to the fund which invests the money on workers' behalf, mainly in the stock market. That makes the fund heavily dependent on how the market performs.

The comptroller's office said the fund paid out $2.47 billion in benefits during the quarter. Benefit payouts have been growing as more public workers retire.

The quarter's low returns come after strong investments gains since the financial crisis in 2008-2009, which wiped out $45 billion of the plan's assets. Despite recent gains the fund still only has about 90 percent of the assets needed to meet its commitments over the long term.

Over the last five years the fund has returned 10.17 percent annually but that drops to 7.12 percent over a 10-year period, which factors in losses from the financial crisis. If the stock market does not achieve the strong returns of the last few years that number will fall further below the required return.

The S&P 500, an index measuring the performance of the 500 largest U.S. stocks, fell 0.2 percent in the first quarter of the plan's financial year and is up just 0.7 percent in the financial year to date. That compared to a gain of 11 percent last year and nearly 30 percent in 2014.

(Reporting by Edward Krudy; Editing by W Simon, Bernard Orr)

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