Arizona State Retirement records 1.1% return on back of high alts exposure

Arizona State Retirement System, Phoenix, reported a net return of 1.1% for the fiscal year ended June 30.

The $48.6 billion pension fund’s return well exceeded its policy benchmark return of -2.1% for the period, according to a performance report included with Aug. 29 investment committee meeting materials.

For the three and five years ended June 30, the pension fund returned an annualized net 8.4% and 8.3%, respectively, compared to the respective benchmarks of 7.5% and 7.1%

The pension fund had returned a net 25.1% for the fiscal year ended June 30, 2021.

For the most recent fiscal year, the pension fund benefited from significant exposure to credit, private equity, and real estate that totaled 56% of assets in a harsh market environment for public equities and fixed income.

For the year ended June 30, the Russell 3000 index and Bloomberg U.S. Aggregate Bond index returned -13.9% and -10.3%, respectively, in sharp contrast to returns of 44.2% and 4.6% for the year ended June 30, 2021.

Among the pension fund’s asset classes, private equity was the top performer with a net return of 32.4% (above the benchmark return of 6.6%), followed by real estate at a net 20.9% (below its 27.3% benchmark) and credit at a net 11.3% (above its 5.8% benchmark).

Posting negative returns were interest rate sensitive fixed income, with a net return of -10% (above its -10.3% benchmark); domestic equities with a net -13.6% (-13.7%); and international equities, -19.5% (-19.9%).

As of June 30, the actual allocation was 23.5% credit, 21.4% domestic equities, 19.8% real estate, 14.5% international equities, 12.7% private equity and 6.9% interest rate sensitive fixed income and 1.2% cash.