NM investment funds feel impact of tariff-driven market downturn

SANTA FE — New Mexico’s public retirement systems and permanent funds have felt the impact of a steep market nosedive prompted by President Donald Trump’s trade war.

A state pension fund for retired educators recorded a nearly $500 million loss over the last week, though a top investment official said Monday the pension fund’s long-term solvency would likely not be affected unless the market downturn persists.

“Given a reasonable environment, you would expect these markets to recover,” said Bob Jacksha, the chief investment officer for New Mexico’s Educational Retirement Board.

He also said the pension fund, which had a $17.9 billion total value as of February, has only about a quarter of its total portfolio invested in public equity, or stocks in private companies.

However, Jacksha described the market downturn as “economic malfeasance” on the part of the Trump administration, saying few investors expected the taxes on imports from other countries to be so hefty.

Meanwhile, the State Investment Council, which manages 12 different state funds, has seen more than $1 billion in market declines since the end of February, a SIC spokesman said Monday.

Before that drop, however, the total size of the portfolio invested by the SIC had more than tripled over the last 10 years — from $20 billion to about $60 billion — due to strong investment returns and robust inflows into the funds from taxes and royalties collected from the oil industry and other sources.

Charles Wollmann, the SIC’s spokesman, told the Journal the short-term market volatility would not affect the annual distributions that several funds make to the state to help pay for K-12 public schools, early childhood programs and other beneficiaries.

In large part, that’s because the distribution levels are based on multi-year rolling averages of the funds’ total value. The distributions for the new state budget year that starts July 1 are set to exceed $2.5 billion.

“The market upheaval is of course not a positive event, injecting a lot of volatility into state investments and delivering market value declines in the short term,” Wollmann said.

“That said, we are well-positioned and our portfolios are intentionally crafted to ride out the storm in these types of market events,” he added, while pointing out only about 35% of the SIC’s assets are invested in stocks.

Trump has rebuffed calls for a pause on the tariffs from business leaders and members of Congress, but reportedly said Monday he was open to negotiations “if we can make a really fair deal and a good deal for the United States.”

The president also threatened additional tariffs on China, on top of 34% tariffs announced last week and a separate 20% tariff touted as a punishment for fentanyl trafficking, according to the Associated Press.

Meanwhile, the SIC could consider tactical rebalancing changes to its investment portfolio when it meets later this month, Wollmann said. But he said state investment officials would not make knee-jerk reactions, saying, “The last thing we would do is sell into a falling market, which would lock in any losses.”

Similarly, state pension fund officials said they are not planning any major investment strategy changes in response to the market downturn, which is the most severe crash since the market plunged in 2020 in response to COVID-19 pandemic lockdowns.

Greg Trujillo, the executive director of the New Mexico Public Employees Retirement Association, said Monday the pension fund for retired state, county and municipal employees would “stay the course” as long-term investors.

He also said the PERA fund had like other pension funds felt the impact of the market downturn, with its total portfolio decreasing by about $250 million over the last week — from $17.8 billion on April 3 to more than $17.5 billion as of Monday.

But, like the state’s other investment funds, Trujillo said the PERA fund’s limited investment in stocks allowed for a smaller hit when compared to the overall stock market.

He also said the pension fund’s market allocation was designed to withstand stress greater than the 2008 recession without impacting its ability to provide regular retirement benefits.