The first quarter of fiscal year 2015 ended last month, and investment performance at the Kentucky Retirement Systems came in below benchmarks for the period.
Including October, KRS investments are down 3 percent since July 1.
The system’s chief investment officer, David Peden, revealed the performance data at a board meeting on Tuesday.
Reported by the Lexington Herald-Leader:
Hedge funds and other alternative investments are the only assets currently gaining value for the Kentucky Retirement Systems, however controversial they might be otherwise.
For the first quarter of fiscal 2015, ending Sept. 30, its investments declined 1.41 percent overall, worse than the comparable benchmark, David Peden, chief investment officer for Kentucky Retirement Systems, or KRS, told the Public Pension Oversight Board on Tuesday.
“It’s been a challenging start to the year,” he said. “October hasn’t helped any. It’s actually a little worse — down by about 3 percent if you include October.”
After the meeting, Peden said KRS’ worst losses were in public equities — traditional stocks and bonds, especially those based in other countries. By contrast, he said, hedge funds were up 0.74 percent, private equities were up 1.49 percent and real estate was up 2.03 percent.
Experts consider KRS the weakest state retirement system in the country. It faces $17 billion in unfunded liabilities due largely to inadequate state payments for most of the past 15 years, starting during Gov. Paul Patton’s administration.
Jim Carroll, co-founder of the advocacy group Kentucky Government Retirees, told the board that KRS needed a massive infusion of cash, possibly from a pension bond that would require legislative approval. KRS now has so little money that even a booming stock market isn’t enough to prop it up, Carroll said.
“Over the last three years, the fund has exceeded its assumed rate of return and yet lost a staggering $952 million,” he said. “In other words, positive market performance has become disconnected from asset growth. The run-out date — the date when the fund would be depleted if there were no more assets coming in — has shrunk to two years and 10 months.”
KRS investments returned 15.5 percent in fiscal year 2013-14.