The Boston Globe ran an article on January 22, 2014 Mass. pension fund posts 15.2% gain for ’13.
The pension fund beat its internal benchmarks last year in most categories, although it lagged in public real estate trusts, distressed debt, and timber holdings. The fund continued to enjoy improved results in hedge funds, with a 12.6 percent return last year versus an 8.8 percent average return for fund-of-funds.
The pension fund has shifted away from fund-of-funds, which use middlemen and charge extra fees, and is instead investing directly in a smaller group of higher-performing hedge funds. Overall, the fund expects to save $100 million in fees annually in 2015, and already has saved tens of millions.
State Treasurer Steve Grossman, who is chairman of the state pension board, said the fund’s strong results last year will help lower its $28.3 billion unfunded liability. The fund paid out $1.6 billion in retirement benefits in 2013.
“Our commitment to maximizing returns while successfully managing risk demonstrates sound fiscal leadership that will serve the interests of the Commonwealth’s taxpayers,’’ Grossman said.
Had I read that story back then, I might have thought “Oh, that’s nice”. However, after I wrote the previous post on this blog Is New Jersey Fudging Its Pension Fund Results to Deflect a Christie Scandal?, the whole thing takes on a new light.
According to the Globe article pension board chief Michael Trotsky is a former hedge fund manager who took over the pension job in 2010.
I did better than a 15.2% gain in 2013, and I am living off my pension fund investments. I wouldn’t touch a hedge fund with the proverbial ten foot pole.
September 15, 2014
In an attempt to start looking more deeply into this issue, I did a search of the Tresurer’s web site.
I found an article Massachusetts Pension Fund Overcharged.
“These overcharges are simply unacceptable, and we will take every step available to recoup lost funds and prevent this from happening in the future,” said Grossman. “Profiting disproportionately on the backs of the Commonwealth’s pensioners cannot be allowed to continue.”
A good sign that the Treasurer is paying attention, and intended to recoup the lost funds.
I found the 2012 Annual Report of the Massachusetts State Retirement Board. There is the chart on page 21 that gives some figures on the issue that concerns me. It shows the PRIT Fund Core Asset Allocation. Hedge Funds are 9.07% and Private Equity is 11.94% of the allocation. I don’t know how this compares to other state run investments. It is a higher allocation that this non-expert investor would like to see.
I also found a reprint of an August 6, 2014 article from The Boston Globe, Mass state pension fund rose 17.6% in fiscal ‘14. It compares the performance of Massachusetts to a few other states.
The items noted above are only the beginning of the research that would need to be done. Also, people far more expert than I in interpreting these types of documents need to have a look.