Maryland’s state pension portfolio grew by just 0.36 percent in fiscal 2012, well short of its target average return.
The $37.1 billion investment portfolio has a projected average rate of return of 7.75 percent, according to the Maryland State Retirement and Pension System.
“The last 12 months presented a challenging environment for investors, particularly in international equity,” A. Melissa Moye, the agency’s chief investment officer, said in a statement.
The portfolio’s public equity assets took a 6.8 percent loss, while its other asset classes — including private equity and real estate assets — saw a positive return, according to the agency.
The portfolio’s international public equity assets saw a 14.5 percent loss, in part, because of the European debt crisis, said Robert Burd, deputy chief investment officer.
At the end of fiscal 2011, Maryland’s pensions were funded at 64.7 percent, with an unfunded liability of $19.7 billion. Lawmakers approved a plan in 2011 to fund 80 percent of the state’s pensions by 2020 by increasing the amount employees must pay toward their pensions.
Data for fiscal 2012 still is being calculated and will be released later this year, according to the agency.
But disappointing investment returns in any one year aren’t necessarily cause for alarm, said Keith Brainard, research director for the National Association of State Retirement Administrators.
“We tend to focus on longer time frames,” Brainard said.
State Treasurer Nancy K. Kopp, who chairs the system’s board of trustees, emphasized in a statement Friday that looking at long-term performance is crucial.
“Taking the long view, the system has on average exceeded the assumed rate of return over the last 25 years,” Kopp said in the statement.
In fiscal 2011, the state’s portfolio saw a 20.04 percent return on investments, well above the 7.75 percent assumed return rate, which translated to a gain of $6 billion in assets.
Other states also are facing disappointing pension returns. The $233 billion California Public Employee Retirement System reported a fiscal 2012 return of 1 percent, down from a projected return of 7.5 percent. The New Hampshire Retirement System, which has a projected return of 7.75 percent, saw a return of 0.7 percent.
The returns seen by Maryland and California were not surprising, Brainard said.
“[They’re] in the ballpark of what I’ve seen among other pension funds,” he said.