11
Feb
2015

U.S. Public Pensions Return 6.8% in 2014 for Six Years of Gains

Categories: National Developments
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Bloomberg Business by Martin Z. Braun, February 9, 2015

U.S. public pensions reported median returns of 6.8 percent last year, the sixth year in a row of gains after the financial crisis, according to Wilshire Associates.

The gains, though, are less than the annual investment returns of 7.5 percent to 8 percent that many state and local governments count on to pay benefits for teachers, police and other employees. In the 10 years through Dec. 31, public pensions had a median return of 6.6 percent.

“A lot of the plans can’t be satisfied with a return of less than 7 percent,” said Bob Waid, a managing director at Santa Monica, California-based Wilshire, adding that a portfolio containing 60 percent U.S. stocks and 40 percent U.S. bonds returned 10 percent. “I’m a huge advocate of diversification, but you have to wonder sometimes when you see that the guy who did 60/40 beat you.”

While the Standard & Poor’s 500 Index of U.S. stocks returned 13.7 percent, public pensions were dragged down by international investments. Stagnation in Europe and a strong dollar led to losses of almost 4 percent on foreign stocks, according to Wilshire.

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