U.S. Public Pensions Show Biggest Investment Gain in Three Years

U.S. state and local-government pension investments gained the most in three years as stocks soared, according to a report to be released today by Wilshire Associates Inc.

Public pensions had median increases of 16.9 percent for the 12 months ended June 30, according to data from the Santa Monica, California-based consulting firm. It was the best performance since the funds rose 21.2 percent in fiscal 2011. Those with assets greater than $1 billion performed best, reporting median jumps of 17.4 percent, boosted by bigger allocations to private equity, hedge funds and other alternative assets.

Smaller state and local-government pensions target more of their money to less-risky U.S. bonds, which hindered their performance relative to larger plans, said Robert Waid, a managing director at Wilshire.

“Alternatives outperformed the non-U.S. equity asset class,” Waid said in a telephone interview. “Larger public plans are more likely to have more exposure to alternatives.”

Retirement plans with assets of more than $5 billion had a median allocation of 10.5 percent of their assets to alternatives, compared with 1.3 percent for all public pensions, according to Wilshire’s Trust Universe Comparison Service. Investment officers are turning to private equity and hedge funds to boost returns and diversify their portfolios after the stock market collapse in 2008.

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