Record Investment Earnings – and Government Contributions – for US Public Pensions

The largest investors in the US have made some impressive investment returns, while the government is increasing its support to the system.

(June 29, 2012)  —  Public sector pension plans in the United States scored their largest investment returns in almost three decades over the first quarter of the year, as the government also ploughed in record levels of contributions, data have shown.

The largest 100 public-employee retirement systems saw aggregate earnings on investments reach $179.2 billion in the first three months of the year, the United States Census Bureau announced yesterday. This is the largest recorded gain since the third quarter of 1974 when the bureau began collecting data.

Collectively, assets rose by 5.6%, from $2.6 trillion to $2.8 trillion at the end of March, bringing them to the second highest figure since the downturn in 2008, the bureau said.

Alongside these gains, government contributions also reached record levels in the first quarter of the year.

The report said: “There was a quarter-to-quarter increase of 12.7%, from $21.5 billion to $24.2 billion in the first quarter of 2012 and a year-to-year increase of 14.5% from $21.1 billion in the first quarter of 2011.”

However, employee contributions quarter-to quarter also increased, but to a lesser extent. They rose 1.5%, from $9.2 billion to $9.3 billion in the first quarter of 2012 and there was a year-to-year increase of 7.9% from $8.6 billion in the first quarter of 2011.

In terms of allocation, these large investors have been increasing their exposure to assets based outside their home jurisdiction. The report showed holdings of international securities had risen to the highest level since the census began recording this type of data in 2000.

The report said: “There was a quarter-to-quarter increase of 16.3%, from $472.8 billion to $550.0 billion in the first quarter of 2012. International securities year-to-year increased 7.4% from $512.3 billion in the first quarter 2011. International securities comprised almost a fifth (19.9%) of the total cash and security holdings of major public pension systems for the current quarter.”

The bureau said it had reclassified some assets to better show their characteristics. This meant federally-sponsored agency securities are now classified under federal government securities instead of corporate bonds. Private equity, venture capital, and leveraged buy-outs are now classified under corporate stocks instead of other securities.

These changes had no impact on the measurement of international securities, the bureau said.

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