The $14.9 billion Kentucky Retirement Systems lost money on its pension investments during the fiscal year that ended June 30.
Preliminary statements show a negative 0.52 percent return on pension investments, trailing the industry benchmark return of a positive 0.21 percent, KRS said in a prepared statement.
KRS posted a five-year investment return of 5.38 percent and a 10-year return of 5.02 percent. Although that’s better, it falls short of the assumed rate of return of 6.75 percent that KRS counts on for its financial projections. The KRS board of trustees agreed to lower the rate of return to 6.75 percent from an even more ambitious 7.5 percent less than a year ago.
“Fiscal year 2016 has been a difficult year for all capital market participants. The year was marked by extreme capital market volatility,” KRS said.
The retirement systems did particularly poorly with equity investments from outside the United States and “absolute return” funds, which are funds that can employ risky strategies like those used by private hedge funds.
KRS is responsible for providing pensions and retiree health insurance to about 350,000 state and local government workers and employees of many “quasi-public” agencies with ties to government.
KRS and the state’s other major public pension fund, Kentucky Teachers’ Retirement System, together face tens of billions of dollars in unfunded liabilities, largely due to years of inadequate funding by the state. Gov. Matt Bevin has made pension liabilities a top priority of his administration, pledging to steer as much additional money into the ailing systems as possible.