Public funds are becoming more confident of their readiness to address retirement trends and issues over the next two years, according to new research.
This is a key finding of the 2013 NCPERS Public Retirement System Study. Conducted by the National Conference on Public Employee Retirement Systems (NCPERS) and Cobalt Community Research, the study polled 241 state, local and provincial government pension funds with a total number of active and retired memberships surpassing 12.4 million and assets exceeding $1.4 trillion. The majority (82 percent) were local pensions, while 18 percent were state pension funds.
The report reveals an overall confidence rating of 7.8 on a 10-point scale (very satisfied = 10), up from 7.7 in 2012. The rating is based on respondents’ answer to the question, “How satisfied are you with your readiness to address retirement trends and issues over the next two years?”
Respondents’ average expense in 2013 to administer retirement plan funds and to pay investment manager fees is 57.3 basis points (100 basis points equals one percent point). This is a significant decrease from the 2012 level of 73.1.
“Funds with lower expenses provide a higher level of benefit to members — and produce a higher economic impact for the communities those members live in — than most mutual funds,” the report states.
Among the report’s additional findings:
● More than one-third of public funds offer a 3 percent or greater cost of living adjustment (COLA). This compares with 5 percent, 15 percent and 6 percent of funds that offer COLAs of 2.5 percent, 2 percent and 1.5 percent, respectively.
● Funds reported domestic equity exposure at 35 percent on average (down from 36 percent in 2012) and international equity exposure at 17 percent). Funds reduced their exposure with international fixed income by almost three percent.
● Funds with the highest one-year return had a significantly higher allocation to domestic equity (50 percent) and domestic fixed income (20 percent) with lower allocations to every other asset class.