PennSERS Investments Lose More Than 16% During First Three Quarters

The pension fund’s market value has fallen by more than $7.4 billion as of Sept. 30, despite outperforming its benchmark.

The Pennsylvania State Employees’ Retirement System reported a 5.04% loss for the third quarter and a 16.13% loss for the year through September 30, lowering the pension fund’s market value to $32.5 billion from $34.5 billion through the second quarter and $39.9 billion at the start of the year.

Despite the losses, the performance exceeded that of its benchmark portfolio, which lost 5.08% during the quarter and was down 16.39% year to date. 

Emerging markets equity was PennSERS’ worst performing asset class for both the third quarter and the year to date as of September 30, tumbling 10.22% and 29.74%, respectively, during those periods. International developed markets equity lost 8.79% during the quarter and 26.78% through Q3, followed by private equity, which lost 5.86% during the quarter and was down 4.74% over the first nine months of the year.

The portfolio’s Treasury inflation-protected securities dropped 5.6% during the quarter, bringing its nine-month loss to 14.85%, while its U.S. equity investments declined 4.35% for the quarter as its total loss for the year grew to 24.51%. Real estate investments closed the quarter with a 1.59% loss but were up 4.56% year to date.

Legacy private credit and cash were the only assets that did not decline during the quarter, rising 0.63% and 0.51%, respectively, and increasing 6.57% and 0.70%, respectively, during the first three quarters. All returns are reported net of fees, while private equity and real estate returns are reported on a quarter lag and are adjusted for cash flows.

PennSERS reported three- and five-year annualized returns of 4.89% and 5.09%, respectively, compared with its benchmark’s return of 5.40% and 5.89%, respectively, during the same time periods. Over the longer term, the pension fund reported investment returns of 6.53%, 4.28%, 7.53% and 6.53%, respectively over the past 10, 15, 20 and 25 years. The pension fund underperformed during each of those time periods, as its benchmark returned 7.20%, 5.58%, 8.32% and 6.99% respectively, over the past 10, 15, 20 and 25 years.

“SERS is a long-term investor with the mission of paying pension benefits for the lifetime of our members,” Joe Torta, the executive director of PennSERS, said in a statement. “Our members can be assured that the fund is fully invested and well-positioned to benefit as markets recover.”

The pension fund’s asset allocation, as of September 30, was 29.9% in U.S. equity, 21.1% in fixed income, 19.9% in private equity, 11.6% in international developed markets equity, 8.7% in real estate, 3.2% in emerging markets equity, 3.0% in inflation protection, 1.3% in cash, 1.2% in legacy private credit and 0.1% in legacy hedge funds. [Source]

The pension fund’s board also approved a $100 million investment in the Hellman & Friedman Capital Partners XI fund within its private equity asset class.


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