North Carolina Pension Investment Performance is Bad, Again

North Carolina Treasurer Janet Cowell recently released North Carolina’s pension investment returns.  As usual, the press release did not provide any relevant point of reference as to whether the returns were “good” or “bad” other than to compare them to an obscure, undefined, and obviously cherry picked benchmark.  On the surface, it would appear the returns are “good” since every return for every time period was higher than this mysterious, ever changing, self-managed and self-serving “benchmark.”

I thought I’d compare North Carolina pension investment returns to the average public pension returns as published by The Bank of New York Mellon Public Pension Universe (click here and see page 4).  Glancing at the table below, I believe the word “bad” adequately describes North Carolina’s pension investment performance.  Over any time period one wishes to compare, the North Carolina pension investment performance lags the median public pension returns.

North Carolina Pension Investment Returns as of 9/30/2013
	1-Year		3-Year		5-Year		10-Year
North Carolina	9.97%		8.82%		7.78%		6.89%
Median Public Pension	12.25%		10.29%		8.23%		7.27%
Under-performance	-2.28%		-1.47%		-0.45%		-0.38%

Just to put the last year’s investment performance in perspective, if the $83 billion North Carolina pension merely had average returns, the pension would have earned an extra $2 billion. This is roughly the equivalent of 10% of the entire North Carolina state annual budget!  Or, this $2 billion short fall is roughly the equivalent of 20% of the entire state's annual spending on education. 

If you are a state employee or teacher and you are upset about budget cuts and a lack of raises, just imagine what the state of North Carolina could do with an extra $2 billion. That could be a reality if only your pension investments could achieve “average” returns.