New Jersey’s pension fund for public workers recorded a negative return of 2.5% since the July start of the fiscal year, owing to a “very volatile investment period” amid the coronavirus outbreak, the state’s investment director said Wednesday.
Director of Investment Corey Amon cautioned the results through April 30 are preliminary and incomplete because of lags in the reporting of alternative investments and that the fund may have lost more.
For the first 10 months of the fiscal year, he said, the fund lost 2.47%. Since the start of the 2020 calendar year, the fund posted a negative 7.05% return and an asset loss of about $5.9 billion, according to Division of Investment reports. But most of those losses were recorded between Dec. 31 and Feb. 29. From the end of February through April, the asset losses were under a half billion dollars.
The latest returns reported do not reflect returns in the private equity, real assets, real estate and private credit portfolios, Amon said told the State Investment Council, which met by teleconference Wednesday.
“For context, approximately 80% of the private equity portfolio return reflects December valuations with a 20% balance reflecting September 2019 valuations,” Amon said.
Valuations for real estate and real assets experience similar reporting delays, he added.
Final returns likely will be lower once the state has updated valuations for its public market assets “because most of the private market valuations do not yet capture the impact of the March drawdown,” Amon said, noting he doesn’t expect the private market comeback to match that of the public market.
“While it’s also reasonable to expect some level of rebound for the private markets in the current quarter, following the sharp rebound in public equity markets, we know that a significant portion of the subsequent public equity market rally was led by a narrow subset of stocks,” Amon said. “And while it is impossible to know in advance, any rebound in private markets during the June quarter may be somewhat muted relative to the dramatic move up in the public markets.”
New Jersey’s public pension system is among the worst-funded in the U.S. but has been improving as the state increases how much money it contributes each year. Investment earnings play a big role in the health of the fund.
When the investments take a hit, the state and local governments that employ public workers have to make up for those losses in the years to come.
As of June 30, the most recent date for which estimates are available, the system had enough assets to cover 40.4 percent of what it owes workers, which is an improvement from 38.4 percent a year prior, according to financial disclosures that follow national accounting standards. The unfunded liabilities dropped from $130.7 billion to $120.4 billion.
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