(Bloomberg) -- U.S. public pensions reported median returns of 6.8 percent last year, the sixth year in a row of gains after the financial crisis, according to Wilshire Associates.
The gains, though, are less than the annual investment returns of 7.5 percent to 8 percent that many state and local governments count on to pay benefits for teachers, police and other employees. In the 10 years through Dec. 31, public pensions had a median return of 6.6 percent.
“A lot of the plans can’t be satisfied with a return of less than 7 percent,” said Bob Waid, a managing director at Santa Monica, California-based Wilshire, adding that a portfolio containing 60 percent U.S. stocks and 40 percent U.S. bonds returned 10 percent. “I’m a huge advocate of diversification, but you have to wonder sometimes when you see that the guy who did 60/40 beat you.”
While the Standard & Poor’s 500 Index of U.S. stocks returned 13.7 percent, public pensions were dragged down by international investments. Stagnation in Europe and a strong dollar led to losses of almost 4 percent on foreign stocks, according to Wilshire.
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
- Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
- Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.