US State Pensions: Investment Gains Dwarfed by Payouts

Assets in US state pension funds fell for the first time in two years, according to a report from the US Census.

(August 5, 2013) — State-administered public pension systems have posted payouts of $196.7 billion in June 2013, some $104.9 billion more than the investment gains made in the preceding 12 months.

Investment returns were down sharply last June, from $414 billion in the fiscal year 2011/2012 to just $91.8 billion.

Contributions to the state retirement systems from employees and government topped $111 billion, but total pension fund assets fell 1% to $2.5 trillion in fiscal 2012, well below 2007 levels when fund assets reached $2.8 trillion.

The Census report also showed that total state pension liabilities amounted to $3.5 trillion at the end of fiscal 2012. Total membership in state-administered pension systems also increased 0.3% to 17.5 million people.

The vast majority of investments by state pension funds were in corporate stocks–$934.5 billion of the $2.5 trillion, to be exact.

Another $450.7 billion is in foreign and international securities, with $252.8 billion in US governmental assets.

For the Census, federally-sponsored agency securities are classified under federal government securities instead of corporate bonds. Private equity, venture capital, and leverage buyouts are classified under corporate stocks instead of other securities.

However, the figures may not be as bad as they first appear. The Census report covers the fiscal year ended on June 30, 2012, meaning it captured the poor market performance between mid-2011 and mid-2012 when the Standard & Poor’s 500 index rose less than 2%, but missed the 2013 rally that pushed up the index 25% since July 2012.

Related Content: Are Private Equity Partners Responsible for Unfunded Pensions? and Senator Hatches a Risk Transfer Plan for Public Pension Funds

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