U.S. Large-Cap Equities Drive Mass PRIM’s 11.4% Return in 2023

The Massachusetts state pension fund fell just short of its benchmark, as its asset value grew to more than $100 billion.

Robust equity returns spurred the Massachusetts Pension Reserves Investment Management’s Pension Reserves Investment Trust Fund’s 11.4% return in calendar 2023, raising its total asset value to $100.9 billion. The performance fell just short of its benchmark’s return of 11.8%; however, this was an improvement from 2022. when it underperformed its benchmark by nearly 300 basis points.

The top-performing asset class in 2023 was U.S. large-cap equities, which returned 26.5% for the PRIT Fund’s investment portfolio, followed by U.S. small- and mid-cap equities, which gained 18.2%, and developed international equities, which rose 17.7% during the year. Timberland investments earned 11.4%, while U.S. high-yield bonds returned 12.1%, and private debt and private equity gained 9.9% and 6.8%, respectively.

Real estate was the only asset class that did not produce a return for the portfolio, losing 5.8% for the year. However, this easily outperformed its benchmark, which lost 10.8% in 2023. It was an off year for the fund’s real estate assets, which have three-, five- and 10-year returns of 9.1%, 7.9% and 8.8%, respectively.

The pension fund reported three-, five- and 10-year annualized returns gross of fees of 6.2%, 9.5% and 7.9%, respectively for the calendar year that ended December 31, topping its benchmark’s returns of 5.2%, 8.4% and 6.8%, respectively, during the same time periods. For the fiscal year that ended September 30, the PRIT fund reported total three-, five- and 10-year returns gross of fees of 7.4%, 6.8% and 7.8%, respectively, ahead of its benchmark’s returns of 5.7%, 5.9% and 6.6%, respectively, during the same periods.

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Private equity was by far the pension fund’s top-performing asset class over the past three, five and 10 years, returning 19.2%, 19.2% and 19.5%, respectively, during the time periods. This is nearly twice the return of real estate, the next-best-performing asset class, nearly three times the return of global equities and 10 times the return of its core fixed-income investments.

The PRIT Fund is a pooled investment fund that invests the pension assets of the Massachusetts Teachers’ Retirement System, the State Employees’ Retirement System and the Boston Teachers Union, along with any county, authority, district and municipal retirement systems that elect to invest in the fund.

As of June 30, the PRIT Fund’s asset allocation was 23% domestic equity, 17.4% private equity, 13.3% core fixed income, 11.7% international equity, 10.9% real estate, 8.4% portfolio completion strategies, 7.1% value-added fixed-income, 4.4% emerging markets, 3.1% timberland and 0.5% in overlay, with 0.1% in its global equity emerging-diverse manager program.

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