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UPDATED: Public Funds: Is 15 Percent the Magic Benchmark for Recent Annual Returns?

Janet Cowell

NC State Treasurer Janet Cowell

For American public funds whose fiscal year ends on June 30, it appears that 15% was the benchmark return to beat. The $90.1 billion North Carolina Retirement Systems returned 15.88% for the fiscal year ended June 30, 2014. The pension investor has a target rate of return of 7.25% and is headed by North Carolina State Treasurer Janet Cowell. In August, the pension organization received approval to hire 10 new investment staff that were added in a state budget bill signed by North Carolina Governor Pat McCrory.

In a press release, Cowell commented, “The North Carolina pension fund is strong and well-positioned for the long-term. Our strategic, incremental diversification efforts are showing results.”

Looking to the golden state of California at the Sacramento pension giants, the California Public Employees’ Retirement System (CalPERS) returned 18.42% and CalSTRS posted 18.66%.

North Carolina Retirement Systems – Recent Performance

Asset Class FY Returns Current Allocation
Equities 24.66% 46.90%
Private Equity 18.27% 4.8%*
Credit Strategies 12.90% 5.30%
Real Estate 12.03% 8.40%
Inflation-Protection 8.21% 3.40%
Fixed Income 6.04% 30.40%

Source: North Carolina Retirement Systems

The $14.1 billion Oklahoma Teachers’ Retirement System returned 22% net of fees for the fiscal year. The top asset class was master limited partnerships earning about 42%, followed by U.S. equities at 27.6%.

U.S. Public Fund Annual FY Returns (Sample)

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Asian Sovereign Funds Not Slowing Down on Tech Investing

According to data from SWFI’s Sovereign Wealth Fund Transaction Database, Asian sovereign funds invested US$ 6.05 billion directly into companies and assets in the information technology sector from Jan 2017 to November 22, 2017. In a comparable time frame from Jan 2016 to November 22, 2016, this same group of Asian sovereign funds directly invested US$ 5.02 billion in the sector. These are direct investments, not fund commitments or manager allocations.

Asian sovereign funds such as GIC Private Limited, Temasek Holdings and the Korea Investment Corporation (KIC) have demonstrated bullish signals to the technology community over other sectors. GIC and Temasek have also been major investors in the private side of deals, funding a wide range of tech startups, while providing financial firepower in buyout transactions.

Some notable direct tech investments in 2017 by sovereign funds include Meituan-Dianping, SoundCloud, Nets A/S, Visma AS, Turn, Inc. and Vantiv.

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Future Fund Makes a Guardian Out of Former J.P. Morgan ANZ Chair

The Australian government has appointed Robert Priestley – current non-executive chair of J.P Morgan for Australia and New Zealand (ANZ) and a non-executive director of ASX – to serve on the Future Fund Board of Guardians for a five-year term from November 7, 2017. Priestley replaces former Morgan Stanley Australia chief executive Steven J. Harker.

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Associated British Ports Reboots Property Development Arm to Capitalize on Land Bank

Associated British Ports (ABP) – operator of 21 major ports throughout the United Kingdom – has announced a reboot of its ABP Property division, complete with a new team of specialists in commercial development and logistics led by Huw Turner, in order to identify and develop strategically significant locations in its 2,372 acre land bank.

ABP is owned in large part by a consortium of pensions and sovereign funds, including the Canada Pension Plan Investment Board (CPPIB) at 33.88% ownership, OMERS at 30%, Singapore’s GIC Ventures Pte Ltd at 20.00% ownership, and the Kuwait Investment Authority at 10.00% ownership. Large institutional investors such as sovereign funds, pensions, and endowments have slowly increased allocation towards infrastructure over the past six years as an alternative to equities and bonds, according to asset allocation data from SWFI.

Plans

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