Municipal experts hold long view on plummeting pension funds

LYNN – Public pension fund managers are keeping their eyes fixed on the financial horizon as grim news of short-term losses keeps rolling in.
Officials say the Massachusetts public pension fund lost about 13 percent of its value or about $5 billion last month, but still outperformed similar funds. Municipal retirement administrators like Revere?s Carolyn Russo warned Thursday that updated reports may reveal even steeper declines.
?While it?s disturbing, we?re well positioned compared to other cities,” said Russo.
Revere?s pension fund started the year over $100 million and stood at $84 million on Sept. 30. The state Pension Reserves Investment Trust, including Lynn?s roughly $170 million in investments, lost about 27 percent of its value this year and was worth about $40 billion as of Oct. 31.
By contrast, the average large pension fund has lost about 28 percent. Russo said Revere?s losses in part reflect a conservative, long term investment strategy designed to reduce risk and maximize returns.
The October drop came as financial markets remain in turmoil, and was likely exacerbated by a continued trend that drove the Standard & Poor?s index to close Wednesday at its lowest level since March 2003.
“Clearly, all investors are faced with unprecedented market conditions, so nobody?s immune,” said Michael Travaglini, executive director of the fund, the Pension Reserves Investment Trust. “But when you lost a quarter of your fund?s assets, right, whether you?re an individual or a pension plan, that?s not good.”
The state recently pushed back by two years the deadline by which it must fund its pension system fully, from 2023 to 2025. The system was funded at 79 percent when the fund level was $53.7 billion at the beginning of the year, but the drop in value and the elongated schedule have eaten dramatically into that performance.
The $5 billion October drop represents a steep drop for the fund, which has in recent years outperformed other similar systems.
?That?s bad, but not altogether unexpected,” said Steve Poftak, research director of the right-leaning Pioneer Institute.
?Some of these alternative investments, I think, are going to smooth some of the ups and downs you?re seeing in the market,” said Poftak, pointing to PRIT investments in hedge funds.
Travaglini said that the fund earned a cumulative 80 percent from 2003 to 2007, after a 2002 that saw an 8.9 percent loss. He said PRIT officials were working to assure local systems that fall under its aegis that the trend will buck up over the long term.
?We?re in very regular communication with our clients, simply trying to keep them from overreacting, for lack of a better phrase. We?ve been through periods of economic crisis before,” he said, adding that those periods were, “I can?t, say exactly like this one.”
?There seems to be acceptance, is the way I would describe it,” he said. “I think in part because there?s enough information through the press and otherwise ? I think the gravity of the economic conditions are apparent to people.”