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State pension fund posts 9.5% annual return amid market rout

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New York’s state retirement system saw a 9.5% annual return during the fiscal year that ended in March, surpassing its long-term investment target despite increasing turmoil in the world’s financial markets.

The common retirement fund’s gains, which came before the worst of this year’s stock-market slide, increased the value of the fund’s assets to $272.1 billion, state Comptroller Thomas DiNapoli announced Monday. The returns were supported by U.S. equities and large gains on its private equity investments.

“There has been tremendous volatility in the markets in recent months, but thanks to the state pension fund’s diverse investments, it finished the year above our assumed rate of return,” DiNapoli said in a statement.

The returns may give the fund only a temporary reprieve from the losses that have piled up in bond and stock markets this year as central banks worldwide raise interest rates, threatening to slow down growth dramatically. DiNapoli said he expects to see a challenging environment for the foreseeable future because of market volatility due to Russia’s invasion of Ukraine, inflation and supply chain issues.

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As of March 31, the fund had about half of its assets invested in publicly traded equities. Almost 22% was in cash, bonds and mortgages, with 10% in real estate related investments. Almost 14% of its portfolio was in private equity, which saw a return of about 37.6%.

The latest yearly gains outstripped the fund’s long-term rate of return of 5.9%, which helps determine how much needs to be set aside to cover all the benefits promised to retirees.

Since the end of New York’s fiscal year, the stock market has tumbled, however, pushing the S&P 500 Index down during the second quarter by the most since the crash during the early days of the pandemic in 2020.

Such losses in stocks and bonds are on track to leave state and local pensions with enough to cover 77.9% of all the benefits that have been promised, down from 84.8% in 2021, according to the New York-based nonprofit Equable Institute. It would mark the biggest financial setback to such funds since the Great Recession.