NM investment funds hit slowdown after rapid growth - Albuquerque Journal

NM investment funds hit slowdown after rapid growth

Copyright © 2022 Albuquerque Journal

SANTA FE — After recording rapid growth over much of the last two years, New Mexico’s pension and endowment funds have seen their investment gains stagnate this year due to a market downturn.

But the explosive growth of the state’s Land Grant Permanent Fund in previous years means large distributions to help fund schools and other state programs will likely continue for the next several years.

And pension fund officials said Monday they’re still well positioned to remain solvent into the future, in part due to changes made in recent years.

New Mexico’s teacher retirement fund, the Educational Retirement Board, was one of the few national pension funds to post a positive investment return for the fiscal year that ended June 30.

While the 1% investment return might not seem like much, the $15.5 billion pension fund outperformed a national benchmark due in part to an investment mix that included holdings in private real estate and private equity that performed well during the just-ended year, said ERB’s chief investment officer Bob Jacksha.

“We’re trying to be really well diversified, so no matter what happens we’ll be OK,” Jacksha told the Journal.

The state’s other pension fund, the Public Employees Retirement Association, has seen its funded ratio — a figure that compares assets on hand to future benefits owed — improve since a 2020 bill changed how some retirement benefits are calculated.

The fund’s estimated value is now $16.7 billion after a negative 1% investment return over the past year. It could be on track to be 100% funded within the next 50 or 60 years, said the pension fund’s executive director Greg Trujillo.

Like other pension funds, both New Mexico retirement funds rely on investment gains to help offset the difference between benefits owed over time and incoming contributions.

Meanwhile, even with choppy recent market conditions, the Land Grant Permanent Fund that provides annual distributions for New Mexico public schools, hospitals and other beneficiaries was valued at about $24.4 billion as of June 30 — up from about $19.7 billion at the end of 2019.

In part, the increase has been due to record-high contributions into the fund from the State Land Office, primarily from taxes and royalties that are collected from the oil and natural gas industry.

State Investment Officer Steve Moise told members of a legislative interim committee Monday the high inflows helped the state’s largest endowment fund weather a recent market downturn that meant a negative 2.2% investment performance over the last budget year.

“We’re seeing record inflows with new records being set frequently,” Moise told members of the legislative Investments and Pension Oversight Committee during a meeting at the Roundhouse.

In all, he said the State Investment Council now oversees roughly $38.8 billion in total investments, a figure that also includes a state “rainy day” fund intended to hold some revenue from cash-flush years for future revenue downturns.

“The funds have been booming in the last decade — it’s no secret,” Moise said.

The recent growth of the Land Grant Permanent Fund comes as statewide voters are set to decide the fate of a proposal to take more money from the fund for early childhood programs and other educational programs, which could include an extended school year.

The proposed constitutional amendment will appear on the ballot for the Nov. 8 general election after being approved by lawmakers last year.

As for the state’s two retirement funds, the PERA covers about 47,700 state workers, municipal employees, judges, firefighters and law enforcement officers. It pays benefits to about 42,700 retirees.

The ERB, for its part, has roughly 59,000 active members, including teachers, school administrators and university professors.

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