New York City’s five pensions beat their investment target over the past fiscal year, propelled by a record-breaking US stock market.
The funds for police officers, firefighters, teachers, civil employees and school personnel returned 13% in the year through June 30, pushing assets to $326.3 billion, according to a news release Wednesday from City Comptroller Mark Levine. It was the funds’ best return since 2021 and exceeded their 7% target.
The gains are expected to ease pressure on New York’s budget. Levine estimates it will reduce the city’s pension contributions by about $6.3 billion over the next five years. Officials project a $6.4 billion deficit for the fiscal year beginning July 1, 2027.
“Global markets faced significant headwinds over the past year, and our results demonstrate the importance of maintaining a long-term focus and a diversified strategy designed to deliver sustainable, risk-adjusted returns for decades to come,” Levine said in the news release.
The pensions benefited from the steep jump in stock prices, driven by investor exuberance over artificial intelligence. Foreign developed-market shares returned 15.6% and emerging markets surged 42%.
Still, the funds trailed the 15.5% gain of a simple portfolio made up of 60% global stocks and 40% US bonds, according to investment consultant Wilshire.
Alternative investments like private equity and private real estate have lagged stocks as higher interest rates, macroeconomic uncertainty and geopolitical upheaval have made it harder for firms to sell older assets and raise new funds.
The city’s private equity and private real estate assets returned 7.2% and 4.5% respectively. Levine said private markets investments diversify the pensions’ portfolio and limit potential losses when market prices drop. Alternative credit returned 7.8%.
Stocks make up about 43% of the pensions’ assets, public fixed income and high-yield bonds comprise around 31% and the remainder is in private market alternatives and cash, according to the release.
Written by: Martin Z Braun @Bloomberg
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