(Bloomberg) -- Public pensions this year endured their worst quarter of investment performance since the onset of the Covid-19 pandemic in 2020.
Public pension assets posted a median return of -8.86% for the second quarter and -7.91% for the year ended June 30, according to a report published Tuesday by Wilshire Trust Universe Comparison Service. The pension funds still beat returns for all plan assets tracked by Wilshire, which posted a median return of -9.63% for the second quarter and -10.59% for the year.
Pension funds three years ago posted returns of 6.46%, and five years ago reported returns of 6.82%.
“If you look back 50 years, you’ll be hard pressed to find another quarter where global equities were down by double-digits and investment-grade bonds were down 5%,” said Wilshire President Jason Schwarz in a statement accompanying the report.
Both large and small public pensions outperformed the traditional 60/40 portfolio loss of -11.36% and the multi-asset Wilshire Risk Parity-12% Target Volatility Index loss of -12.37% for the quarter. The same is true for the year, with public pensions beating the 60/40 portfolio loss of -13.42% and the WRP-12% index loss of -11.41%.
Public pensions have increased their allocation of assets to risky investments such as publicly traded stocks, private equity and hedge funds to more than 66%, according to a May 2022 report by Pew Charitable Trusts, increasing the chances for volatility in their portfolios.
Earlier this month, Wilshire Associates, a consultant to pension funds, said that second-quarter losses caused state retirement systems’ percentage of assets to promised benefits to decrease to 70.1% from 81.4%. State pensions have a median assumed rate of return of 7%, according to the National Association of State Retirement Administrators.
©2022 Bloomberg L.P.