Public Pension Shift to Alternatives Results in More Volatility

By Rebecca Moore | April 20, 2017
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Looking at recent returns across state plans over the past five years, Pew found that funds posted overall fiscal year gains ranging from 17% in 2014 to 1% in 2016.

Government sponsors should consider investment performance both in terms of long-term returns and cost predictability, according to Pew. From this perspective, many fund portfolios are highly correlated with the up-and-down swings of the stock market and expose state budgets to considerable risk and uncertainty.

Investment performance varies widely among public pension funds, with only two of the funds examined exceeding investment return targets over the past 10 years. Although these results reflect the losses that occurred at the onset of the Great Recession, more recent performance, low interest rates, and forward-looking economic forecasts point to the need to closely examine long-term investment return targets.

The report is available for download here.