From the Star Ledger:
New Jersey’s government-worker pension fund investments fell short in the fiscal year that ended in June.
The pension fund returned 6.27 percent, trailing the 7.5 percent the pension system assumes it will earn on investments over the long term.
The public pension fund 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, as well.
Investment-grade credit and real estate were “bright spots” in the performance of the pension fund’s portfolio last year, Division of Investment Director Corey Amon told the State Investment Council Wednesday. Investment-grade credit returned more than 10 percent and real estate was up 8.7 percent, according to Division of Investment reports.
Private equity, part of the state’s alternative investment program, returned 10 percent. It has in recent years been the fund’s best-performing asset class.
U.S. equities were up 7.85 percent but suffered somewhat because the pension fund’s U.S. equities portfolio focused on small cap stocks, which underperformed, and value stocks while holding fewer growth stocks that actually did better than expected, Amon said.
Shortly before leaving office, Gov. Chris Christie lowered the assumed rate of return from 7.65 percent to 7 percent. Gov. Phil Murphy reversed course, citing the hardship that placed on the state and local governments, which would have had to come up with another $700 million in pension contributions.
Murphy set the assumed rate of return at 7.5 percent, putting in place a plan to gradually reduce it to 7.0 percent in 2023.