Pension returns trail targets for first time in 3 years

U.S. public pensions posted their weakest performance in three years, falling a percentage point short of their investment targets, and the prospect of rock-bottom interest rates and a trade war-induced recession could put a greater strain on state and city retirement plans.

The median U.S. public pension returned 6.2% in the fiscal year ending in June 30 after paying fees to investment managers, according to Norwalk, Connecticut-based Investment Metrics, which provides analytics to institutional investors. Pensions assume a median annual investment return of 7.3% to cover promised benefits.

“The market is challenged ,” said Farouki Majeed, chief investment officer of the $14.7 billion School Employees Retirement System of Ohio, which returned 6.6%, short of its assumed 7.5% return. Over a 10-year period, the fund has returned an annualized 9.4%. “We certainly don't expect that over the next 10 years.”