Fiscal Year 2024 in Review
Fiscal Year 2024 in Review
The Connecticut Retirement Plans and Trust Funds (“CRPTF”) delivered an annual total return of 11.5 percent, net of all fees and expenses, for the fiscal year ending June 30, 2024. The three largest pension plans, the Teachers’ Retirement Fund (TERF), State Employees’ Retirement Fund (SERF) and Connecticut Municipal Employees’ Retirement Fund (CMERF), which together represent about 90 percent of total assets, returned 11.50 percent, 11.52 percent and 11.44 percent, respectively. For the longer-term period of ten years, ending June 30, 2024, TERF and SERF generated net investment results of 6.55 percent and 6.65 percent, slightly underperforming the plans’ composite benchmark returns of 6.70 and 6.71 percent, respectively.
CRPTF asset classes performance results were very strong during the Fiscal Year 2024 benefiting from financial markets continued performance above expectations. The strongest investment performances at the asset class level were realized within the Global Equity (Domestic, Developed and Emerging Markets Equity) portfolios followed by favorable contribution from Global Fixed Income reacting to lower inflation and anticipated start of FOMC rate cutting cycle. In private markets space, Private Credit Fund was a particular standout taking advantage of favorable economic conditions and efficiently capturing an illiquidity premium and certain market inefficiencies relative to public debt markets. For Fiscal Year 2024, returns were: Domestic Equity, 24.22 percent, Developed Markets Equity, 12.65, Emerging Market Equity, 14.94, while the Non-Core asset class within Global Fixed Income and Private Credit Fund investments within private markets returned 9.73 and 11.20 percent, respectively.
Over the course of the fiscal year, CRPTF continued to make progress towards the long-term asset allocation policy targets and made significant new investment commitments. The CRPTF committed a total of $4 billion towards new partnerships and 23 managers were added to the private market asset classes – comprised of $950 million in private equity, $1.2 billion in private credit, $1.4 billion in real estate, and $475 million in infrastructure and natural resources. In the public markets, the CRPTF continued to optimize individual asset class structures by streamlining and reducing external investment manager rosters to better align the portfolios with the policy level benchmarks, and actively negotiating reductions in management fees. Within Global Fixed Income, the emerging market debt managers were rolled up into the Non-Core Fixed Income asset class. The Connecticut Inclusive Investment Initiative (Ci3) is comprised of Ci3 Manager-of-Managers partners who oversee sub-managers approximating $2 billion on June 30, 2024. The invested capital with the emerging and diverse managers is nearly evenly split between public and private investments and totaled $1 billion across the various public asset classes, and $1 billion for the private asset classes.
At the conclusion of Fiscal Year 2023, the Budget Reserve Fund (BRF) continued to exceed the statutory limit of 15%. In September and December of 2023, following the release of the State’s financial statements for Fiscal Year 2023, the Treasurer’s office directed contributions in the excess combined BRF amount of nearly $1.9 billion, allocating approximately $828 million to Teachers’ Retirement Fund and $1.046 billion to the State Employees’ Retirement Fund. The growth of the State’s BRF allowed the State to responsibly pay down long-term unfunded pension liabilities.
At the end of Fiscal Year 2024, Connecticut held another surplus Budget Reserve Fund balance of approximately $935 million in excess contributions to pay down the State’s long-term unfunded pension liabilities, projected transfers are estimated at $515 million to SERS and $420 million to TERS.