Posted on: Tuesday, November 9, 2004

Pension fund up in down market

By Deborah Adamson
Advertiser Staff Writer

The state pension fund eked out a small gain in the third quarter in the midst of volatile markets roiled by record high oil prices, higher interest rates, escalation of the Iraq war and uncertainty over the election.

The Employees' Retirement System, which handles the pensions of 99,000 government employees, retirees and beneficiaries, reported a 0.67 percent return in the quarter ended Sept. 30, compared with the previous quarter. Fund assets were $8.6 billion.

"We are very pleased with the performance of the fund this quarter, given that the equity markets were down nearly 2 percent and yet we managed a positive return," said Kimo Blaisdell, chief investment officer of the pension fund.

During the same period, the Standard & Poor's 500 Index fell by 1.87 percent.

International stocks boosted ERS pension returns, up 1.22 percent in the quarter compared with 0.21 percent for the peer group made up of other large pension funds.

Investments in U.S. stocks were down 1.78 percent for the ERS, but still beat the negative 1.82 percent at other large funds. Domestic fixed income investments matched the peer group at 3.13 percent while international fixed-income lagged other pension funds at 2.81 percent versus 3.39 percent.

Real estate returned 6.32 percent compared with 1.74 percent for ERS peers, but comprised only 7 percent of the fund.

About 45 percent of the pension fund is invested in U.S. stocks while U.S. fixed income comprises 19 percent.

International equities make up 18 percent while international fixed-income stands at 7 percent of the total.

Alternative investments make up the rest.

For the 12 months ended Sept. 30, the pension fund recorded a 13.36 percent return compared with 12.42 percent for its peers.

Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.