Investments by the Washington State Investment Board in its home state totaled $2.4 billion at the end of the 12-month fiscal year on June 30, 2017, up 29.5% from the previous fiscal year, shows the board’s annual economically targeted investment report for the state plan that reported a funded ratio of 84% in it’s June 2017 annual report.
The report, scheduled to be discussed at the board’s April 19 meeting, provides annual data on how the board’s investments impact various economic sectors in Washington state, said board spokesman Chris Phillips. The $98.4 billion board runs the defined benefit pension plan programs for state employees.
The board, like many other public pension plans in the US, runs in-state investment programs, but regulations can vary as to what preference those investments take compared to out-of-state investments.
The $2.4 billion in-state investment is just a small segment of the board’s investment trust, but Phillips said the board must fulfill its fiduciary duty in seeking the best investments.
“We don’t invest with any sort of up-front objective or mandate regarding in-state economic development,” he said in an emailed response to questions from CIO. “That’s not our mission. But we do want to provide information to show that a byproduct of our investment strategies is occurring in our home state. That’s a very important distinction since some public funds pursue an economic development agenda outright.”
The report attributes the largest increase in the asset value of Washington holdings to strong investment performance by Washington-based public companies in its portfolio. While the report doesn’t specifically name the companies, Washington-based companies like Amazon, Starbucks, and Microsoft all saw tremendous boosts in their stock prices during the 2016-2017 fiscal year that ran from July 1 to June 30.
“The value of public equities increased 57.5%; this was due primarily to the strong performance of many large Washington-based companies that are heavily represented in the passive indices, as well as additional investments by an active manager in several Washington-based companies,” the report said.
Washington-based public company stock held by the investment board totaled approximately $1 billion of the pension trust’s equity portfolio as of June 30, 2017, board statistics show. The total equity asset class totaled $35.5 billion.
Tangible assets saw the biggest increase among the board’s investment groups, 71% or $57.6 million, in the June 30, 2017, fiscal year. The report notes that several funds that are part of the board’s portfolio invested in Washington farmland in the fiscal year. The portfolio of Washington investments in the asset class totaled $80.8 million out of a total tangible assets portfolio of $3.4 billion.
The board’s in-state real estate portfolio increased by 15.1%, reflecting, according to the report, “a combination of acquisitions and dispositions, as well as increases and decreases in values at the property level. It also reflects, in some cases, reductions in the holdings size due to receipt of additional financing proceeds.”
Real estate assets invested in Washington totaled approximately $1 billion out of the $15.5 billion portfolio.
Two asset classes saw declines in their Washington investments between the two latest fiscal years.
Private equity saw the biggest drop, 9.6% between June 30, 2017, and June 30, 2016, year over year. The decrease was due to $14.5 million in Washington investments in the latest fiscal year compared with $26.7 million in the previous fiscal year, the report said
As of June 30, the report noted the board had $190.8 million invested in Washington-based companies in its private equity portfolio, representing approximately 1.6% of the total domestic private equity portfolio.
The report said that the Washington-based investments have been made in 42 different funds by 25 individual and general partners, four of which were regionally based in the Pacific Northwest.
It says investment staff continues to engage with officials on regional funds raising capital in the Pacific Northwest.
“Staff has performed due diligence on regional funds raising capital, although most of the fund sizes are smaller or the funds younger than those WSIB usually invests in directly,” the report said.
The fixed income asset class saw a small drop in Washington-state investments, the report noted, declining 2.9% as of June 30, 2017, from the previous fiscal year. Total in-state fixed income investments totaled $64.4 million of the $16.9 billion fixed income investments, the report said.
Phillips said investment officials would not be immediately available to discuss the report because it is yet to be formally presented before the board.