US - The North Carolina Retirement System lost $17bn (€12.8bn) in value in 2008 and is bracing itself for a steeper decline in real estate values, the Department of State Treasurer announced on Friday.
The pension fund, which is the 10th largest in the United States, blamed the financial crisis for the fall and said assets now stand at $60bn, down from $77bn on 31 December 2007.
Janet Cowell, state treasurer for North Carolina, insisted retiree benefits are safe despite the loss but said the fund plans to review its investment strategy going forward.
"During times of market volatility, we don't ‘double down' in search of more risk to compensate for our losses. We buckle down and continue a careful approach focused on a long-term strategy that ultimately benefits the people of North Carolina."
The pension fund's real estate portfolio was one of the better performing assets, albeit it returned -5.6% over 2008, however, the treasurer warned this figure could continue to fall during 2009 as a result of declining property values.
The Real Estate Investment Portfolio (REIP) was valued at $4.2bn at 30 June 2008, and represented 5.8% of the pension fund's assets.
The allocation is split again as 82% in US investments and approximately 18% in overseas investments, with the majority of its international exposure in European countries like France, Germany and the UK. It also invests in Asian countries like Japan, China and Hong Kong.
The REIP increased in value during the fiscal year from $3.5bn to $4.2bn and added 11 fund relationships, and the aim is to focus on opportunities in land, infrastructure, agricultural funds, REITs, emerging markets and core and value-added strategies.
Stock market losses over the year of nearly 40% (39.9%) and bond gains of 7.4% were the main cause of the state fund's 20% drop in total asset value. The pension fund's conservative investment policy, which involves investing a higher percentage of its income in bonds than other public pension plans, is said to have limited its losses.
The state treasurer has decided to bring in an outside auditor to review the pension plan's investment strategy and remains confident about the fund's future.
The Treasurer's office has asked the General Assembly to contribute $29m to keep the pension plan fully funded but warned employer contributions to the plan will go up.
The Department of State Treasurer acts as North Carolina's chief investment officer and administers the State's pension fund, which provides retirement benefits and savings for over 820,000 state employees and retirees.
If you have any comments you would like to add to this or any other story, contact Poppy Sketchley on + 44 (0)20 7261 4629 or email poppy.sketchley@ipe.com
