State of Wisconsin Investment Board

Wisconsin Pension To Hand Out “Modest” Benefit Boosts After Investments Outperform Benchmarks

The State of Wisconsin Investment Board announced Wednesday that the state’s retirees will receive a “modest” boost in pension benefits this year.

The benefit increase will kick in around May, said a board spokeswoman.

Meanwhile, employee contribution rates will likely decline.

The boost was triggered by double-digit returns on pension investments in 2014.

From the Wisconsin State Journal:

The trust funds for state employees and retirees saw returns in 2014 that will result in “modest” pension and interest rate increases, the State of Wisconsin Investment Board said Wednesday.

[…]

The changes in retirement checks will occur in May, [said Vicki Hearing, board spokesperson] and the final rate has not yet been set by Department of Employee Trust Funds.

The board has earned positive returns each year since 2009 for the Core Fund and in five of the last six years for the Variable Fund.

Robert Conlin, secretary of the Department of Employee Trust Funds, said in the statement that the returns “mean that the positive momentum will continue in 2015, as we’ll be able to provide retirees another increase in their annuities and contribution rates for active employees and employers should continue their trend lower.”

A breakdown of the investment returns that allowed the benefit increase to happen, from the Wisconsin State Journal:

The $88.7 billion Core Fund, with a diverse portfolio, yielded a preliminary return of 5.7 percent, putting its five-year return at 9.3 percent. The Variable Fund, a stock fund, ended the year with a preliminary return of 7.3 percent and a market value of $7.3 billion.

Both funds ended near the one-year benchmark returns set by the board. The Core Fund is 5.6 percent and the Variable fund is 7.5 percent. For the three-, five- and 10-year periods, both funds are ahead of their benchmarks, according to Vicki Hearing, board spokesperson.

The Core Fund returned 13.6 percent and 13.7 percent in 2013 and 2012, she said. The Variable Fund returned 29 percent and 16.9 percent in those years.

The State of Wisconsin Investment Board manages $96 billion in pension assets for the Wisconsin Retirement System.

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Wisconsin Pension Commits $300 Million to Retail, Office Properties

The State of Wisconsin Investment Board (SWIB), the entity that manages assets for the state’s retirement systems, has made two separate commitments to real estate totaling $300 million.

The Board committed $150 million to one fund that invests in retail, office, and apartment properties. It also made a second commitment of $150 million to another fund that acquires grocery stores.

From IPE Real Estate:

State of Wisconsin Investment Board (SWIB) is increasing its investment in the UBS Trumbull Property Fund and has awarded two separate account mandates.

The $150m commitment is the second made by SWIB to the core open-ended fund in the past three years, having made an initial $125m allocation in 2012. The investment was worth $165m in September.

UBS Trumbull, managed by UBS Realty Investors, invests in US office, industrial, retail and apartment sectors.

SWIB said it invests in core real estate for its stable income return with low leverage. The investor is expecting its commitment to be called by the manager in the next 12 months.

SWIB has also commited $150m to a new separate account managed by AmCap and $158m to a separate account managed by Heitman.

In a new relationship for the pension fund, AmCap’s Wilson AmCap I fund will be looking to acquire core grocery-anchored/necessity-oriented US retail.

Jake Bisenius, chief investment officer for AmCap, said its total assets under management are now over $1bn.

The real estate manager has a large concentration of assets in Colorado, buying off-market in cash.

“Most of our purchases are done with cap rates that come in the high-5% to low-6% range,” Bisenius said.

The SWIB manages over $100 billion in assets for the state’s retirement systems and trust funds.

Some Pension Funds Are Interested In The Hedge Funds CalPERS Dropped

The CalPers Building in West Sacramento California. — The CalPERS Building in West Sacramento California.

CalPERS announced plans to phase out its $4 billion hedge fund portfolio last month. But other pension funds are now interested in the hedge funds CalPERS is getting rid of, according to a report from FinAlternatives:

The California Public Employees’ Retirement System already has potential buyers kicking the tires of its $4 billion hedge fund portfolio.

The pension, which last month announced it would take at least a year to “strategically exit” its hedge fund investments, has received indications of interest for some or all of its holdings from other state pension funds, reports Fortune, citing sources familiar with the situation.

The State of Wisconsin Investment Board, which has yet to meet its hedge fund investment targets, was identified by a source as one of those potential buyers.

A CalPERS spokesman told Fortune the pension will “evaluate all possibilities” with the portfolio, but would not confirm interest from other pension funds.

“Ultimately, we will exit those investments in a manner that best serves the interests of the fund,” said the spokesman.

Pension360 has covered the fact that, while CalPERS has exited hedge funds, not many pensions have followed in their footsteps.

Photo by Stephen Curtin via Flickr CC License