State pension fund sees gains amid market recovery

State treasurer Denise Nappier said Thursday that Connecticut’s pension fund rebounded strongly in fiscal year 2010, with the overall investment return up nearly 13 percent over the prior year.

The improved results were aided by a relatively strong market recovery compared to late 2008 and early 2009, when stocks across all asset classes nosedived amid concerns about the stability of the U.S. financial system.

The pension funds net market value increased by $1.5 billion, with $2.6 billion from investment returns, Nappier said.

Those gains were offset by $1.1 billion in net benefit payments, which put the pension funds total value at $21.9 billion at the end of June 30.

The average net return was 12.9 percent in fiscal 2010, compared to a negative 17.4 percent return in the prior year period.

In fiscal 2009, the net market value of the fund declined from $25.9 billion to $20.4 billion.

“The one year investment return is a welcome recovery from the difficult market environment of the last several years and our pension funds’ related performance setbacks,” said Nappier, who is principal fiduciary of the funds.   “While we still have a ways to go, it takes the sting out of the dismal returns of fiscal year 2009 and demonstrates the resiliency of our pension fund investment program.” 

The pension fund provides benefits to more than 187,000 state and municipal workers and retirees, including teachers.

For fiscal year 2010, the funds saw particularly robust returns from emerging market equities, high yield bonds, emerging market debt, and private equity, with returns of 25.30 percent, 24.63 percent, 23.05 percent, and 17.32 percent, respectively, Nappier said. 

Commercial real estate investments, however, showed a weaker performance as high levels of unemployment and a subdued recovery in consumer spending impaired valuations, Nappier said. 

Nappier cautioned, however, against expecting similar returns over the next year as the economic recovery moderates. 

“These are difficult times, particularly given a high level of unemployment,” she said. “It could be some time before we see robust economic growth and positive market returns on a sustainable basis, especially where job growth remains anemic.”