Rhode Island’s pension fund investments returned a robust 4.14% in January, outpacing its investment benchmark, which returned 3.60%, and earning the fund $323 million.
The strong returns were fueled by the fund’s investments in the global stock market, which were mostly low-fee index funds, according to state Treasurer Seth Magaziner.
“Our investment strategy is designed to provide long-term growth over time and stability when markets are challenging,” said Magaziner.
The fund also outperformed its benchmark over the past three years, returning 8.7% in annualized returns over that time compared to 8.5% for the benchmark, and 7.8% for a traditional portfolio comprised of 60% in stocks and 40% in bonds. It also matched its benchmark with 5.7% annualized returns over the past five years, and beat a 60-40 blended portfolio’s return of 5.2% over that period.
But the fund underperformed its benchmark over the 10-year period, returning 8.9% compared to 9.1% for the benchmark. This was, however, above a 60-40 portfolio that would have returned an average of 8.5% a year over the past 10 years.
Under Rhode Island’s “Back to Basics” asset allocation policy, which was adopted in the fall of 2016, the fund is dividend into three broad asset classes: growth, income, and stability, with corresponding allocations of approximately 54%, 7.2%, and 37.8%, respectively, with the remaining 1% in a category described as “other.”
Within the growth asset class, 25.1% of fund is invested in US equities, 14.7% in international developed equities, 6.5% in private equities, 5.3% in emerging market equities, and 1.9% in non-core real estate. Within the income asset class, the fund has 3.9% invested in liquid credit, 1.9% in high-yield infrastructure, and 1.4% in private credit.
Within the stability asset class, the fund has 11.4% in investment-grade fixed income, 6.9% in absolute return, 4.4% in core real estate, 3.9% in long-duration Treasuries, 3.6% in systematic trend following, 2.5% in Treasury inflation-protected securities, and 1.8% in private infrastructure.