Pension Funds Stay Course During Tumultuous Day for Markets

Friday and Monday marked two tumultuous days for global markets, but pension funds with significant allocations toward equities remained un-rattled.

Pension360 already covered the thoughts of New York Comptroller and pension trustee Thomas DiNapoli, as well as CalSTRS CIO Chris Ailman.

The Illinois Teachers’ Retirement System, with a 41 percent allocation toward U.S. and international equities, released a statement to Crain’s Chicago:

TRS believes in its fund’s long-term growth prospects.

“TRS is monitoring the situation within the markets carefully and will take all appropriate steps to maintain our members’ assets,” the system said in an emailed statement. “This latest downturn reinforces the fundamental TRS investment strategy of building a highly-diversified portfolio designed to help the system weather market conditions like these when they occur. We do plan for and expect market fluctuations.”

The unflinching TRS approach is exactly what pension consultants advise, in the near term. Acting rashly after wild market swings often leads to emotionally charged and unproductive moves, they say. “This is when you do stupid things,” said Jack Marco, head of the Chicago pension consulting firm Marco Consulting Group.

Meanwhile, Rhode Island Treasurer Seth Magaziner said he is taking a similar approach: watching the market closely, but not making panic moves. From the Providence Journal:

Asked what actions, if any, Magaziner intended to take, his chief of staff Andrew Roos said: “Treasurer Magaziner and his staff are watching the markets very closely and will take action as appropriate.

“With roughly half of the pension fund invested in equity index funds, we will feel the impact of the recent market volatility on our valuation. However, the other half of the pension fund is invested across a broad range of lower volatility asset classes such as bonds and hedge funds, precisely to limit downside risk when the market declines.”

Seeking to put the minds of the state’s pensioners at ease, he said: “The pension system remains financially sound. We have the cash to meet pension payroll, and our broad diversification is designed precisely to mitigate losses in difficult market situations like the one we find ourselves in now.”

The major U.S. indices were up nearly 2 percent early Tuesday.

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