By Ortec Finance

U.S. public pension plans have been through a torrid year of investment volatility, rising inflation and increasing interest rates.
The Federal Reserve has raised rates nine times in succession taking the rate to 5% – the highest since 2007 – while CPI inflation climbed as high as 9.1% in June 2022. The most recent figure of 4.9% for April is good news but many analysts still expect further Federal Reserve rate rises.
The series of economic shocks helps explain why public pension plans last year averaged a negative return of -6.14%. That is dramatically below the 6.9% average assumed annual rate of return for the sector.*
There is good news – analysts such as the Equable Institute say that despite the challenges of last year U.S. public pension plans are currently in better shape than they were before the COVID-19 pandemic.*
However, it is undoubtedly the case that the sector is facing a tough period and the past three years have increased uncertainty and the pressure on pension plan managers.
It is against that background that Ortec Finance commissioned Pureprofile to take the temperature
of the U.S. public pension sector with independent research** among 50 U.S. public sector pension fund managers responsible for a collective $1.315 trillion assets under management.
Our business is to model and map the relevant uncertainties in order to help pension funds monitor their goals and decisions. We design, build, and deliver high-quality software models for assetliability management, risk management, impact investment, portfolio construction, performance
measurement and attribution, and financial planning.
The study looked at a range of issues including attitudes to risk management, inflation hedging,
stress testing and what U.S. public pensions believe will happen to inflation.
To support our study, we conducted analysis of publicly available data on the funding ratios of U.S. public pension plans to give a better understanding of the current situation.
It shows U.S. public pension plans face major challenges. However, our study demonstrates that they are getting to grips with the issues they face and are even optimistic about the future. We
believe it makes fascinating reading and provides a snapshot of how U.S. public pension plans are building for the long-term after a series of short-term shocks.

Read book “here”