Fundraising

PA SERS’ real assets portfolio returns 6.3% in 2014

The Pennsylvania State Employees’ Retirement System total portfolio reported a net return of 6.4% in 2014, despite a ‘difficult’ second half of the year.

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The Pennsylvania State Employees’ Retirement System (PA SERS) portfolio generated $1.7 billion in investment earnings, net of fees, resulting in a 6.4 percent net return for the 2014 calendar year, the public pension fund said last week in a statement.

“The last half of 2014 was difficult for any US investor in foreign markets,” PA SERS’s chief investment officer Tom Brier said. In the case of PA SERS, this turn in investment climate is reflected in the 0.3 percent net return the fund reported in the fourth quarter of 2014.

“That said, we are seeing positive results from the global equity portfolio during the first two months of 2015,” he added.

The alternatives portfolio, which includes private equity, special situations and venture capital, led returns for the year, the pension fund said.

Its real assets portfolio – comprising investments in energy, real estate, REITs, infrastructure and commodities – achieved a 6.3 percent return for 2014, despite a poor-performing fourth quarter for which it posted a negative return of 1.4 percent.

According to its 2014-2015 Strategic Investment Plan, the $27.3 billion pension fund stated that it plans to diversify its real assets portfolio, which is currently dominated by exposure to real estate and commodities, and increase exposure to infrastructure, energy and other natural resources.

The investment plan also “emphasises liquidity, reduction of cash flow volatility, and pursuit of capital protection strategies to ensure that the fund’s assets are best positioned to meet continuing obligations to beneficiaries.”

PA SERS, like many US pension funds, is currently underfunded and has more retirees than active members.

As of September 30, 2014, its market exposure to real assets stood at $4.4 billion, representing 16 percent of the fund’s overall portfolio. Around one quarter of the $4.4 billion was invested in infrastructure and commodities.

Established in 1923 and headquartered in Harrisburg, PA SERS is one of the oldest and largest retirement plans for public employees in the US, with approximately 230,000 members.