Given how little good news is ever reported about
Philadelphia's municipal pension fund, Thursday was a red-letter day.
The total fund ended the fiscal year up 15.6 percent,
outperforming its benchmarks by 1.96 percent. A more narrow portfolio, managed
internally, did well, too, showing an 11.97 percent return, about 3.5 percent
higher than similar benchmark funds.
That is, in fairness, a very small step in the right
direction.
The city's pension system is severely unfunded, with only
about half the money it needs to pay its $5 billion in obligations to current
and future retirees.
As a result, the report at the pension board's monthly
meeting was well-received, with board members thanking chief investment officer
Sumit Handa.
The board's investment strategy has been revamped with the
arrival three years ago of Handa and executive director Francis X. Bielli.
Investments were tweaked, Handa said, particularly the
pension board's fixed-income portfolio.
The pension fund has outperformed benchmarks for the last
three years. Before that, the fund was laggard against those benchmarks,
underperforming in the last five- and 10-year periods.
While investment firms handle the bulk of funds, the pension
board staff manages a portfolio of about $260 million, or 5.3 percent of the
pension fund. Known as the Independence Fund, it is designed as a
"tactical" fund, Handa said, to be used to rapidly respond to
opportunities the staff might see.
It strives for high returns at low risk. Since it was
established in early 2012, it has been an overachiever by those standards.
Outperforming its benchmark, it has shown only a third of the risk associated
with investing in the S&P 500, while achieving 60 percent of the rate of
return.
While all of that is good news for the city, Finance
Director Rob Dubow was not about to let it go to anyone's head.
"Since we are a little underfunded," Dubow said to
Handa, "if you could do a little better next year, that would be
great."
Source: Philly.com
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