Arabic
Chinese (Simplified)
English
French
German
Portuguese
Russian
Spanish
US. Public Pension Plans Reach 5-Year High of 83.1% Funded
Public pension funds’ funded status has risen to a five-year high amid equity market strength, according to a study from the National Conference of Public Employees Retirement Systems.
The annual NCPERS retirement study, which the organization has conducted since 2011, found that the average public pension has seen its funded status reach 83.1% through the first half of 2024, typically when the fiscal years for these plans ended.
The report also found that discount rates have decreased to an average of 6.67% in the first half of 2024 from 7.31% in the first half of 2021. Over the past five, 10 and 20 years, these funds reported annualized returns of 7.15%, 6.24% and 6.88%, respectively.
“This robust dataset tells a clear story of resilience and strength,” wrote Hank Kim, executive director and counsel at NCPERS, in the report. “In the span of 20 years, public pensions have endured two major economic crises. Yet with strong governance policies and efficient practices in place, pensions have shored up funding levels and improved their long-term fiscal health.”
The plans surveyed by NCPERS, on average, have a 41.5% allocation to equities, 29.7% to alternative investments, 26.1% to fixed income and 2.7% to cash equivalents and other.
Approximately 67% of plan assets under management by survey participants are managed externally. Another 23% said they partially manage their assets in-house. Only 4% of respondents said they managed all assets in house, and another 5% said they took other approaches.
Looking ahead, the report found that some of the biggest priorities in 2025 for these pension funds include improving their cybersecurity, sustaining their pension funding levels, updating their pension administration systems and determining the role of artificial intelligence in pension management.
NCPERS surveyed 201 public pension funds between September 19 and November 14, 2024. Survey respondents collectively manage $3 trillion in assets. Approximately 89% of respondents were defined benefit plans, 10% were combined defined benefit/defined contribution plans, 7% were defined contribution plans and 1% were cash balance plans.
Canada’s CDPQ Inks Another Alternative Energy Deal
Caisse de dépôt et placement du Québec, the public pension fund of Québec, has launched a financial and strategic partnership with the Mohawk Council of Kahnawake to jointly invest in renewable energy infrastructure projects. According to the Canadian pension fund, the venture will also seek to facilitate Canadian Indigenous communities’ access to financing.
Under the joint venture, the organizations plan to establish partnerships based on an alignment of interests, as well as on the “social acceptability of projects.” They are also looking to provide Indigenous communities with the technical capabilities necessary for negotiating complex agreements and analyzing the financial conditions of large-scale projects. According to the CDPQ, the two will also conduct “rigorous monitoring” to help ensure a “sustainable and inclusive” development approach.
“For over a century, major energy infrastructure projects have impacted the rights and lands of Indigenous peoples. We believe that now is the time for our communities to participate in the energy transition by owning and benefiting from energy infrastructure on our ancestral lands,” said Cody Diabo, grand chief of the Mohawk Council of Kahnawake, in a statement.
Diabo added that the partnership intends to provide “First Nations and Inuit communities with the economic opportunity to maximize their participation in large-scale energy infrastructure on their lands and benefit from the revenues generated.”
The venture is the latest alternative investment deal the CDPQ has signed over the past several months. Among other investments, the pension fund announced in October 2024 that it will partner with Nuveen Green Capital to launch a C$830 million ($583 million) financing program for sustainable U.S. commercial real estate.
CDPQ also announced, in late September 2024, that it is acquiring a 25% stake in First Hydro, which operates electricity generation and storage facilities in the U.K. Earlier that month, the pension fund announced it invested C$575 million alongside capital network Fonds de solidarité FTQ in Énergir, a Québec-based energy provider. The investment is intended to support the provider’s efforts to decarbonizing its energy production. Last August, a consortium of Canadian investors that includes CDPQ said it will allocate C$145 million to the MKB Partners Fund III, which makes energy transition investments in the industrial, clean energy and mobility sectors.
Read more @ai-cio
