Public Pensions’ Cash and Short-Term Investments Jumped 16.7% in 4Q

Largest quarter-to-quarter increase since 2005, Census Bureau says.

Assets of the 100 largest US public pension fund systems rose 0.4% in the fourth quarter of 2016, to $3.39 billion, the Census Bureau reported. Compared to 4Q 2015, assets, including the plans’ cash and investments, were up 4.2%.

Public pensions’ holdings of cash and short-term investments jumped 16.7% to $136.6 billion in the fourth quarter. “This is the largest quarter-to-quarter increase since 2005,” the Census Bureau reports. Compared to the previous year, public pensions’ holdings of these assets were up an even more impressive 25.6%, from $108.8 billion. In the fourth quarter, cash and short-term investments made up 4% of the total assets of the largest US public pension systems, their highest level of holdings in this asset category since 2011.

By contrast, public pensions’ corporate bond holdings were down 2.7% in market value to $419.5 billion for the fourth quarter. However, compared to a year ago, they gained 2.6%. For the fourth quarter, corporate bonds accounted for about 12% of the cash and investment holdings of public pension fund systems. 

A similar pattern held for international securities. The 4Q market value of public pensions’ international securities portfolios fell, dropping 1.1% from the third quarter to $644.6 billion. Compared to the fourth quarter of 2015, however, their international securities holdings were up 5.7%. International securities accounted for 19% of public pensions’ overall cash and investment holdings for the fourth quarter.

The market value of the funds’ corporate stock holdings rose 1.1% in the fourth quarter, to about $1.24 billion, for a 4.7% increase from the fourth quarter of 2015. These securities made up about 36% of public pensions’ cash and investments holdings in the fourth quarter. The market value of federal government securities in public pensions’ portfolios was also up 0.5% in the fourth quarter, to $266.4 billion, amounting to about 7.8% of total assets. Compared to a year ago, their value was also up 4.3%.

Employee contributions are playing a bigger role in keeping public pension plans afloat. Contributions by employees rose a substantial 22.5% in the fourth quarter, to $12 billion. Compared to the fourth quarter of 2015, employees increased their contributions 4.2%. Benefits payouts, however, continue to rise. While they were down 2.1% to $64.5 billion in the fourth quarter, they were up 6.1% compared to the fourth quarter of 2015.

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