Treasurer Folwell reports 7.3% increase for North Carolina’s FY returns
State Treasurer Dale R. Folwell, CPA, has reported that the North Carolina Retirement Systems posted overall gains of 7.3 percent for fiscal year 2017 through 2018. However, earnings to date for 2018 reflected only a 1.3 percent increase. The approximately $100 billion fund is managed by the N.C. Department of State Treasurer.
“For the first six months of 2018, the plan has paid out over $3 billion in benefits, $300 million in Wall Street fees while earnings were essentially flat,” said Treasurer Folwell. “Additionally, the 20-year average of 6.1 percent misses the assumed rate of return by almost an entire percentage point.”
In April, the investment return assumption for the North Carolina Retirement Systems (the Fund) was lowered from 7.20 percent to 7.00 percent beginning with the Dec. 31, 2017, valuations. The move was unanimously approved by the Teachers’ and State Employees’ Retirement System (TSERS) and Local Government Employees’ Retirement System (LGERS) Boards of Trustees (Boards).
The change translated into a reduction in the funded status of the affected systems by two to three percentage points.
The following FY2017–2018 returns are reported net of all fees and expenses:
- Public equity rose 12.5 percent
- Private equity increased 16.3 percent
- Non-core real estate and opportunistic fixed income gained 15.9 percent and 6.7 percent, respectively
- The multi-strategy portfolio returned 6.3 percent for the 12-month period
- Inflation-sensitive and diversifier investments increased by 6.8 percent
- Investment-grade fixed income was down 0.4 percent, while cash holdings increased 1.4 percent
The earnings report comes as a national benchmarking survey has confirmed that North Carolina continues to have the second-lowest administrative costs among any U.S. public pension fund in its peer group. Pension administration costs for North Carolina are $23 per member, which is $70 below the peer average of $93 per member. That’s an annual savings of over $55.3 million.
“We appreciate our co-chief investment officers, their teams and our Retirement Systems Division for achieving these results,” added Folwell.
Treasurer Folwell and the investment management team also continued to reduce costs significantly during the fiscal year to provide more value to members of the pension plan. Fees paid to Wall Street investment managers have been cut by $86 million since January 2017, for a projected savings of approximately $344 million over four years. That figure is more than three times Folwell’s original pledge to cut fees.
