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NCPERS 2023 Public Retirement Systems Study Highlights Trends in Fiscal, Operational, and Business Practices
By Hank Kim, NCPERS Executive Director and Counsel
NCPERS 2023 Public Retirement Systems Study: Trends in Fiscal, Operational, and Business Practices, looks at key areas such as fund expenses, plan changes, oversight practices, COLA, investment returns and asset allocation, and funding levels.
NCPERS has conducted an annual study for the past twelve years to benchmark public retirement systems and track trends in fiscal, operational, and business practices. The latest report, NCPERS 2023 Public Retirement Systems Study: Trends in Fiscal, Operational, and Business Practices, looks at key areas such as fund expenses, plan changes, oversight practices, COLA, investment returns and asset allocation, and funding levels.
On February 7 at 1:00pm EST, we will host a webinar to review the key findings from the latest study. During the webinar, the lead researcher will also highlight the features of the interactive dashboard, a tool with which NCPERS members can filter the survey data by type of employee/beneficiary, total participants, and more to better compare their funds' investment performance and business practices to peers. The webinar will be recorded and available on demand, so I encourage you to register here for easy access.
Nearly 200 state and local government pension funds responded to the survey, which was conducted between September and December 2022. These funds represent more than 19.6 million active and retired members, with assets exceeding $3 trillion. Responding funds typically used their most recent Annual Comprehensive Financial Report to complete the survey.
The study shows that public pension funds saw, on average, one-year returns of around 11.4 percent, down from 14 percent the year prior. Looking at asset allocations, real estate and private equity saw the largest average returns, at 19.2 and 33.7 percent respectively. There was not a significant shift in asset allocations year over year.
For the first time, we asked funds about the role of environmental, social, and governance (ESG) factors in their investment decisions. Approximately 54 percent of respondents said these factors are somewhat or very important in their decision-making process.
Public pensions' average funded level rose to 77.8 percent from 74.7 percent the year before. Investment returns continue to be the most significant source of revenue at 68 percent, followed by employer contributions (24 percent) and member contributions (nine percent).
Despite the many unprecedented challenges that public pensions have faced in recent years, fund confidence remains high. Funds were asked, “How satisfied are you with your readiness to address retirement trends and issues over the next two years?” The average confidence rating was 7.8 on a 10-point scale, down slightly from the year before.
NCPERS 2023 Public Retirement Study: Trends in Fiscal, Operational, and Business Practices highlights public pensions' resiliency in the face of volatile markets, rising interest rates, and disruption in the workforce during the COVID-19 pandemic. Public pensions remain dedicated to maximizing returns while managing risks in order to efficiently deliver retirement benefits to public servants all over the country.
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