Massachusetts Pension Reserve Fund Returns 9.5%

Investments beat benchmarks to raise total asset value to $72.9 billion.

Massachusetts’ Pension Reserves Investment Trust (PRIT) Fund returned 9.5% net of fees in fiscal 2018, exceeding its benchmark of 7.9%, and bringing its total asset value to $72.9 billion for the fiscal year ending July 31, according to the Massachusetts Pension Reserves Investment Management Board (PRIM).

“Fiscal year 2018 was another exceptionally strong year for PRIM,” said Michael Trotsky, CIO of the PRIM board at its August meeting, adding that “six of seven major asset classes outperformed their benchmark net of fees.”

The fund’s three-, five-, and 10-year annualized returns as of July 31 were 8.7%, 9.0%, and 6.7%, respectively, compared to its benchmark’s annualized three-, five-, and 10-year returns of 7.4%, 7.5%, and 5.9%, respectively.  

“The returns of each asset class and the entire PRIT Fund were very strong both relative to the benchmarks and in absolute terms,” said Trotsky, “and importantly, expenses and risk remained tightly controlled.”

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Private equity was the top-performing asset class for the fund, returning 19.9% for the year, followed by global equities, which returned 11.7%, and real estate, which returned 8.9%. Timberland and the portfolio completion strategies returned 7.4% and 6.8%, respectively.

The fund said The American Investment Council ranked PRIM Private Equity No. 1 in private equity returns among 163 US public pension funds based on a 10-year performance.

The long-term asset allocation targets for the fund are 39% in global equity, 13% in portfolio completion strategies, 12% in core fixed income, 12% in private equity, 10% in real estate, 10% in value-added fixed income, and 4% in timberland.

Trotsky said the 9.5% return was achieved with a realized volatility of 4.3%, producing a Sharpe ratio, which measures the risk-adjusted return of the fund, of approximately 1.8. He added he believes this ratio would be among the highest in the country, “meaning our portfolio is higher returning relative to our peers even though it has comparatively lower risk, and low cost.”

The PRIT fund is a pooled investment fund that invests the assets of the Massachusetts Teachers’ and State Employees’ Retirement Systems, and the assets of county, authority, district, and municipal retirement systems that choose to invest in the fund.

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