During a volatile period for global financial markets, the New York City Retirement System faced losses across public markets, resulting in a preliminary net investment return of -8.65% across all five pension funds for the Fiscal Year ending June 30, 2022. Overall, the City’s five pension funds performed better than their benchmarks, and each remains well-funded to guarantee retirement security for its members.
The past year has seen the worst stock market decline in decades. In the first half of 2022, the S&P 500 fell 13.8% — its worst performance since the early 1960s. All major public asset classes, except commodities, incurred significant losses. Public equity returns over that period were the worst in fifty years, and U.S. Treasury returns were the worst since 1788. For New York City’s funds, historic losses in public equities and fixed incomes were offset partially by better performance of private market assets.
“Despite market declines on a scale that haven’t been seen in decades, the New York City Retirement Systems outperformed our benchmarks and are well-positioned to weather market volatility over the long term. I am grateful for the hard work of Interim Chief Investment Officer Michael Haddad and the entire Bureau of Asset Management, for navigating the Systems through a challenging market environment. As we welcome Steven Meier as Chief Investment Officer next week, our Bureau of Asset Management will remain laser-focused on ensuring New York City’s public sector workers and retirees will always be able to count on their pension,” said New York City Comptroller Brad Lander.
“The ongoing COVID pandemic, continued supply chain disruptions, rising inflation and Federal Reserve rate increases have resulted in extreme volatility and declines in public market. After a year of record highs, the US markets show mixed signals with public equity and bond markets experiencing historic losses, while private markets fared better. The unique economic moment underscores the importance of a diversified portfolio, both across asset classes and geographies. This structure and flexibility are critical to allow appropriate diversification, thus allowing the portfolio to generate maximum risk-adjusted returns. Under the leadership of incoming CIO Steven Meier, our seasoned investment staff, consultants, and trustees will monitor and adjust our portfolio construction and asset allocation accordingly to ensure the safety and growth of the pension assets for years to come,” said Michael Haddad, Interim Chief Investment Officer.
New York City’s pension fund system is structured to guarantee retirement security for public sector workers and retirees over the long term. Funds are invested with a diverse set of asset managers, through a rigorous process with regular reviews, across a wide range of asset classes, with an asset allocation which is revisited every few years. In years when returns are strong, as they were in FY 2021 when a bull market led to returns topping 25%, the City is enabled to reduce its annual contributions to the pension funds over the subsequent five years. When the funds experience losses, the City is required to increase its contributions over the subsequent five years (with a one year lag), through a formula determined by the City actuary.
Detailed data on the audited pension returns, including asset class returns along with relevant benchmarks, will be included in Quarterly Performance reports in September. Despite losses incurred in Fiscal Year 2022, the pension funds remain well-funded relative to their obligations. Total assets under management as of June 30, 2022 are approximately $240 billion.
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