ERS pension fund gains 2.3% in quarter
The Hawaii Employees' Retirement System says the return trails its policy benchmark
The Employees' Retirement System, which administers the state's largest pension fund, said yesterday its portfolio chalked up a fiscal third-quarter gain of 2.3 percent and boosted assets to an all-time high of $10.9 billion.
Portland, Ore.-based Pension Consulting Alliance, which took over as the fund's adviser on Jan. 1, didn't make any changes during the quarter but said it will be analyzing the portfolio.
Last quarter's return trailed ERS' policy benchmark by three-tenths of a point, but beat the 2.2 percent median return of similar-sized public funds tracked by megabank
State Street.
The ERS provides retirement, disability and survivor benefits for more than 100,000 people, including more than 63,000 active members.
The Hawaii Employees' Retirement System, transitioning to its first new investment adviser in 30 years, said yesterday it posted a fiscal third-quarter gain of 2.3 percent in its pension fund, but that the return trailed its policy benchmark by three-tenths of a point.
However, the performance of the state's largest pension fund did beat the 2.2 percent median return of more than 50 public funds with assets greater than $1 billion tracked by megabank State Street.
Pension Consulting Alliance of Portland, Ore., took over for San Francisco-based Callan Associates Inc. on Jan. 1 under a three-year contract worth $975,000. But the ERS trustees and the newly hired consulting firm, which presented the fund's quarterly report at an ERS meeting yesterday, didn't change any investments during the quarter that ended March 31.
The $206.6 million gain in the portfolio over the previous quarter pushed the total assets in the ERS fund to $10.9 billion, its highest level ever. The fund, which is up 11.6 percent through the first nine months of its fiscal year, also is on track for its fourth straight fiscal-year, double-digit gain.
"It was a pretty good (quarterly) number relative to their peers," PCA Managing Director Neil Rue said. "If you look at the longer term versus their peers, they're pretty competitive. That's a reflection of a pretty well-run institutional portfolio."
Rue said PCA will be working with the ERS trustees to review and analyze any potential restructuring that may occur in the portfolio.
"But nothing will happen overnight," he said.
The ERS portfolio finished in the top 38 percent of its peers last quarter but is only in the top 62 percent over the last 12 months. For three- and five-year periods, though, the ERS fund is in the upper half compared with its peers with returns in the top 33rd and 45th percentiles, respectively.
International equity chalked up the fund's largest asset gain in the fiscal third quarter as it rose 3.4 percent even though it trailed the policy benchmark return of 3.8 percent. Domestic equity rose 1.7 percent, beating the benchmark of 1.3 percent.
PCA said in its report to the trustees that concern about the sub-prime mortgage market contributed to the lag in domestic stocks while international equities -- particularly in the European and Asian markets -- benefited from a weakening in the U.S. dollar.
In fixed income, domestic funds gained 1.6 percent, outpacing the benchmark of 1.5 percent, and international funds rose 1.1 percent to match the benchmark.
Real estate, which is reported on a one-quarter lagging basis, gained 2.2 percent to trail the 4.5 percent benchmark. Alternative investments, such as timber, jumped 11.6 percent.
Separately, the ERS trustees are still looking at finalists for the vacant chief investment officer position. The previous CIO, Kimo Blaisdell, stepped down on Jan. 31 to accept a position as senior vice president in the Honolulu office of New York-based Robeco Investment Management.
The ERS provides retirement, disability and survivor benefits for more than 100,000 people, including more than 63,000 active members.