New York State Teachers’ Posts Strong Q4 Equity Returns

Despite the meme-based antics and political angling, the New York State Teachers’ Retirement System, among many other institutional investors, is likely very satisfied with the completion of the Elon Musk-led takeover of Twitter in the fourth quarter of 2022.

The pension fund held 786,475 shares of Twitter at the end of Q3 and, assuming the fund held shares until the deal finalized at $54.20 per share, freed up $42.63 million to reallocate.

In addition, the fund raised $15.65 million during Q4 from the October 2022 closing of Berkshire Hathaway Inc.’s acquisition of the Alleghany Corporation in a deal which represented a total equity value of approximately $11.6 billion.

“NYSTRS’ domestic equity portfolio, which is mostly internally managed, is routinely rebalanced to adjust for corporate actions and index changes relative to its policy benchmark, the S&P 1500 index,” a pension system spokesperson emailed regarding the reinvestment of funds.

The target asset allocation of the pension is 29-37% domestic equity, 12-28% international/global equities, 12-20% domestic fixed income, 6-16% real estate equity, 3-13% private equity, 2-10% real estate debt, 0.5-5% private debt, 1-4% cash or equivalents, 0-4% global bonds and 0-3% high-yield bonds.

At the end of Q4 2022, the equity holdings of the fund totaled $40.69 billion across 1,604 holdings, generating a return of 5.79% from the prior period, according to the fund’s most recent 13F-HR filing, for the period ending on December 31, 2022. The strong returns were propelled by the likes of ExxonMobil, JPMorgan Chase, Merck, Chevron, Procter & Gamble, Mastercard, Broadcom and AbbVie, which all returned more than 15% in the quarter, despite each position being marginally trimmed by fund management.

The largest single placement made by the pension system during the quarter was a 298,285-share increase in its position in Arch Capital Group, a Bermuda-based specialty insurer that operates in the reinsurance and mortgage insurance segments on a worldwide basis.

The pension fund increased its stake in the company by 950%; reinsurance and insurance companies are especially valued right now because they capture more revenue from their natural operations when interest rates are higher.

The pension started new positions of at least $1 million in the equities of SJW Group, MasterBrand Inc, Lululemon Athletica, RXO Inc, CubeSmart and Antero Resources.

The five largest equity holdings of the pension system by total value were Apple ($2.292 billion, or 5.63% of the equity portfolio), Microsoft ($2.101 billion, 5.16%), Amazon ($872 million, 2.14%), Berkshire Hathaway Class B ($656 million, 1.61%) and Alphabet ($620 million, 1.52%).