PENSION FUND INVESTMENTS DOWN IN '11

MARCH 2012 VOICE: Year 2011 was not a good year for the $47.1 billion Commonwealth’s Pension Reserves Investment Trust (PRIT) Fund.

After strongly recovering from disastrous Year 2008, when the Fund lost -29.50% of its value, followed by earnings of 17.06% in Year 2009 and 13.56% in Year 2010, the Fund was a victim of the worldwide market slump last year. PRIT barely squeaked into the black with a return of 0.15%

Although the majority of the PRIT Fund consists of the state and teachers pension reserves, most local retirement systems have a stake in the PRIT Fund with 56 having placed all of their money in PRIT for investment purposes and another 40 utilizing PRIT for part of their pension reserves. Therefore, it’s safe to say that the PRIT Fund earnings of 0.15% is pretty much the norm for most systems last year, with a few systems possibly showing a slightly higher investment return.

The PRIT Fund actually peaked at the close of 2007 with a value of $53.7 billion and an annualized investment return of 11.41% since 1985, its inception year.

Yet, despite its two excellent years – 2009 and 2010 – the Fund’s value currently remains at $47.1 billion and an annualized low of 9.41%. “While 2009 and 2010 would seemingly have made up for the loss of ’08, it didn’t work that way,” explained former longtime PRIM Board member Ralph White.  “These numbers were starting from a less valued fund, plus there’s been a tremendous draw-down to pay state and teachers pensions, a draw-down well beyond annual state appropriations.

“On the plus side, the state embarked on an extended funding schedule to Year 2040 last year, which will give us more time to catch up. We’re still using the annual earnings assumption rate of 8.25%, which was realistic for 24 years until 2008. It’s important our investment returns continue at that level or higher over an extended period of time. We have an excellent investment Board (PRIM), and I’m optimistic that the PRIT Fund will continue as one of the top performing funds in the country.”