A banner year from the market saw the MBTA Retirement Fund in excess of double its investment return targets, however the embattled pension fund still saw its unfunded liability grow by nearly $150 million, according to reports from and commissioned with the fund.
In 2017, the fund saw a 15.8 percent return on its investments, blowing its 7.5 percent target outside the water, using the fund’s annual financial report. The retirement fund’s returns were boosted usually by a substantial performance rolling around in its stocks portfolios, that will make close to part of the whole investment portfolio. The domestic equity investments saw a 20 % return, the international equity investments returned 30.91 percent additionally, the global and emerging market stock portfolio saw a 39.87 percent return.
But while its investments soared, the fund still found itself having a growing unfunded liability mainly because it is constantly find it difficult to find enough money to repay many retired pensioners. The pension’s unfunded liability grew by $143 million in 2017 to $1.2 billion, in accordance with an investigation ready for the fund by consultant Conduent.
Mark Williams, a finance professor at Boston University plus a longtime critic from the fund, said the fund’s performance inside of a strong market likely suggests even larger increases within the unfunded liability if the economy inevitably turns.
“Historically, we have recessions between every six and eight years. I am now in a very nine-year bull market and there’s increasing signs the economy is slowing, and there’s questions whether this year’s returns is often matched,” Williams said. “Within a downward market, with growing liabilities, the space are going to be bigger.”
Steve Crawford, a spokesman for that fund, said a downturn, unless significant, likely would not be a dilemma.
“The Fund is continually monitoring its investments and has now sound long-term results in vertical markets,” he stated.
Crawford also pointed to your annual report, which lists the modification in unfunded liability as an increase of $80 million last year. The 2 main reports use different methodologies to value the fund’s assets.
The MBTA and Gov. Charlie Baker have pushed for changes into the fund, which operates separately and differently through the pension fund for other state employees.
The fund is confronted with from the pensions of nearly 7,000 retirees which consists of investment returns and contributions from just over 5,000 employees, adjusted Dec. 31, 2017.
The MBTA’s contributions to the fund have steadily increased this year are anticipated to become 22 percent within the payroll, roughly $94 million.
In a speech a year ago, then-chief administrator within the MBTA Brian Shortsleeve said the fund is losing a great deal of money that even excellent investment returns will likely not fix its structural problems.
“Market returns are not likely to rescue the pension,” Shortsleeve’s presentation said. “One bad investment year is crippling.”
Representatives with the Carmen’s Union, whose members have the pension benefits and hold several fund board seats, failed to interact with multiple requests for comment.