Two of the largest public pension funds in the United States lost around a quarter of their value in 2008/09, a stark contrast to how their Australian counterparts performed.
The California Public Employees’ Retirement System, the largest US public pension fund, said the market value of its assets declined a record 23.4 per cent for the year.
Assets totalled US$180.9 billion ($217.83 billion) at 30 June 2009 compared to US$237.1 billion ($285.5 billion) the previous year.
During the fiscal year, the fund put about 23 per cent of its money in US fixed income and bonds, 55 per cent in stocks, 14 per cent in alternatives, 12 per cent in real estate, 2 per cent in inflation-linked assets and 9 per cent in cash.
The California State Teachers’ Retirement System’s investment portfolio lost 25 per cent in the 12 months to 30 June 2009. It held 54.2 per cent in US and non-US stocks, 21.9 per cent in fixed income, 12.1 per cent in private equity, 11 per cent in real estate and 0.8 per cent in cash.
In contrast, the median balanced investment option in Australia lost 12.69 per cent in the 2009 financial year, according to research firm SuperRatings.
“What hurt the US funds is their large exposure to international and domestic equities, which would have swamped their portfolios and so they would have been looking at losses of 20 per cent on international shares alone,” SuperRatings chief executive Jason Clarke said.
“I’m aware that a lot of the large US funds also invest heavily in unlisted assets, so a lot of those unlisted assets would have experienced significant write-downs towards the end of the year and that would have hurt their returns as well.”
Although the Australian and US models were not too dissimilar, Australian balanced funds tended to hold more in local stocks and cash, which performed better and had cushioned losses, Clarke said.
