Big-time returns on New Canaan's pension fund investments
Published 10:26 am, Tuesday, October 22, 2013
Investment results for the town's pension and retirement funds, the two biggest liabilities for retired workers, are both up considerably, according to numbers presented to the Board of Finance Oct. 8.
"The results were good," Board of Finance member Neil Budnick said. "They reflected a market that's been good, too."
The total one-year net returns of the town's investments in the Funded Retirement Plan, which is the pension fund, were up 8.59 percent, and the Other Post-Employment Benefits Trust was up 10.2 percent, according to Wendy Simenson, senior investment consultant for Vanguard Institutional Advisory Services. Vanguard handles the town's long-term investment plans.
Both funds are composed of 60 percent equities and 40 percent fixed-income assets, Simenson said. Stocks in both funds were up more than 20 percent, while bonds were down in the single digits.
"Interest rates have gone up since (Federal Reserve Chairman Ben Bernanke's) tapering in May," Simenson said, referencing the chairman's indication that he might begin to wind down quantitative easing, an economic stimulus program the federal reserve has implemented since 2009.
"All in all, it's a strong showing since this period," she said.
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Board of Finance members were happy about the good news, but noted that the focus on pensions and liabilities, which are the fruition of workers' entire careers, should not be too focused on short-term movements.
"In this kind of situation, quarterly or yearly results are not particularly important," Budnick said. "In this kind of vehicle, which is a long-term liability, long-term results are really important. I would not consider this year's equities rate to be a run rate. Over time, everything comes back to normal."
Board of Finance member John Sheffield agreed, saying that the most important part of the presentation was not even the results, but the fact that the town is paying attention.
"The most important thing is that the Board of Finance ... is doing its job by keeping a watchful eye on the financial metrics of our retirement plans, and doing so while balancing the review periodically with relatively frequent updates, such that changes could be made if necessary," he said.
In past years, the investment revenue on the two funds has been enough that the town has not had to contribute anything to the funds; however, that will not be the case this year. Although the returns are good, costs are also up, Budnick said, so the town will have to include in its upcoming fiscal year 2015 budget some money for the funds, as it did last year in the current fiscal year 2014 budget.
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