Massachusetts Pension Fund Performance Flat in Fiscal 2012

The Pension Reserves Investment Trust, a $50 billion Massachusetts state fund that invests on behalf of public employees and teachers, reported a flat performance for fiscal 2012.

The fund returned a loss of 0.08%, exceeding the benchmark but sharply contrasting with the 22.3% return in the previous fiscal year, when global markets surged.

It blamed two major equity market sell-offs — one triggered by the U.S. Treasury downgrade and debt-ceiling impasse last August, and the next by fears in May of a Euro one breakup amid the Greek sovereign debt crisis.

Still, fund officials tried to put a positive spin.

“[The] return is remarkable when put into perspective: emerging equity markets were down over 16% and international equities as a group fell over 14%,” executive director Michael Trotsky said Friday in a report to the Pension Reserves Investment Management board. “Relatively strong performance in the PRIT Fund’s alternative asset classes, combined with continued strength in fixed income and domestic equities, offset weak international equity markets.”

According to Trotsky, asset allocation changes the fund made last August to reduce the overall risk level of the fund kept returns from being worse. It reduced equity exposure to 43% from 49%, while maintaining or increasing exposure to alternative asset classes.

Noteworthy, he said, was the 4% reduction in developed international equity exposure last August, notably in European equities.

The biggest gains were in private equity and real estate investments, which increased 11.4% and 10%, respectively. Combined, the two account for 22% of the fund’s portfolio.

The fund dropped nearly 6% in global equities, which accounts for 43% of its portfolio. Timber and natural resources, 4% of the portfolio, were down almost 8%.

Fitch Ratings and Standard & Poor’s rate Massachusetts general obligation bonds AA-plus, while Moody’s Investors Service assigns its Aa1 rating.

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