Mass. pension fund posts 15.2% gain for ’13

Managers add $7.9 billion to accounts, with biggest increases coming from US stocks

By Beth Healy
Globe Staff  
January 22, 2014

The Massachusetts state pension fund posted a 15.2 percent investment gain for 2013, as strong markets helped the fund’s managers add $7.9 billion to the retirement accounts of public employees.

US stocks provided the biggest boost to the fund, climbing 33.7 percent during the year, followed by investments in private equity, which rose 21.1 percent.

“This was an outstanding year that capped five really strong years,” Michael Trotsky, chief of the Pension Reserves Investment Management board, said at a meeting of the fund’s investment committee Tuesday.

The Massachusetts fund’s performance compared with a 16.2 percent return last year for the nation’s largest public pension fund, the California Public Employees’ Retirement System.

The strong returns also lifted the state pension fund to a record level, at nearly $58 billion, just five years after the 2008 financial crisis rocked global markets and wiped out billions in savings. But Trotsky, a former hedge fund manager who took over the pension job in 2010, is mindful that after a five-year rebound, he and his staff have to prepare for a possible downturn.

His greatest goal, in addition to achieving the best possible returns for pensioners and taxpayers: to do “a lot better” the next time markets plunge. In the financial crisis of 2008, the state fund lost more than one-quarter of its assets.

Trotsky has focused on lowering the risk in the portfolio. And on Tuesday, he proposed taking some money out of stocks this year, and making a creative move with bonds.
Under the proposal, the fund would trim the amount it invests in US and foreign stocks to 40 percent, from 43 percent. It would also take 1 percent out of hedge funds and put the combined 4 percent of money freed up into a new area for the fund — home-grown strategies that mimic hedge fund returns but at a lower cost.

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