Employees’
Retirement System
records big gainsThe fund turns around a losing
fiscal year on its investments
The state Employees' Retirement System posted a major lift in its investment returns in the three months ending June 30, turning a losing fiscal year into a profit for the fund that holds retirement money for more than 90,000 state and county employees and their families or heirs.
The fund had an 11.1 percent return on its investments in the quarter, money managers told the ERS board of directors yesterday. That followed total losses of 7.2 percent through the first nine months of the fiscal year to end with a 2.9 percent return on investments. That was a turnaround from an investment loss of 5.1 percent for fiscal 2002.
The fund's asset value dipped to $7.7 billion from about $8 billion a year earlier and is still well short of the peak of $9.9 billion reached in 2000. The asset value rises and falls according to investments as well as payoffs to beneficiaries.
"It was a good, strong quarter," said Ronald Peyton, of Callan Associates Inc., the national firm hired by the ERS to help it manage its investments.
"The lower-quality tech stocks really led the way," Peyton said, but the Callan firm had reservations about some of the investment management firms handling the ERS funds.
One result was that the ERS board voted unanimously to drop one manager, Alliance Bernstein, whose investments of ERS funds returned 11 percent in the last quarter but lost 1.6 percent for the year.
Peyton said the improved returns resulted from big changes that his firm and the ERS made to the fund, starting four years ago. Callan Associates advises the fund on how to evaluate the performance of half a dozen investment managers, and reports on the returns of various types of investments.
Its report showed that U.S. equity investments in the ERS portfolio -- the largest single category -- produced a return of 16.5 percent in the latest quarter but a loss of 0.4 percent for the year. International equities -- stocks and similar ownership investments -- had a return of more than 20 percent in the latest quarter. They lost 7.9 percent for the year, but the recent upturn is attractive, Callan said.
International fixed-rate income investments produced the best return in the past 12 months, 20.4 percent. Real estate produced a 5.9 percent annual return, while U.S. fixed-income investments returned 11.1 percent.
