Maryland returns bolstered by private equity

Strong returns from the $37.1bn retirement system’s private equity portfolio helped offset a negative 6% performance in public equities.

The Maryland State Retirement and Pension System’s 7.49 percent return on its private equity holdings provided a glimmer of good news in an otherwise disappointing 2012 fiscal year. 

The $37.1 billion retirement system’s private equity portfolio beat its State Street Private Equity Index benchmark. The index posted a 3.76 percent return on the year, Maryland spokesman Michael Golden told Private Equity International

The retirement system’s strongest performing asset class was real estate, which generated an 8.73 percent return as of 30 June, according to a statement. Fixed income also cracked the 8 percent mark, with an 8.25 percent return on the year.  

Maryland’s overall investment portfolio generated only a 0.36 percent return on the year, failing to meet its 7.75 percent actuarial return target by a wide margin. The retirement system’s overall investment return was bogged down by a negative 6.8 percent performance from its public equities portfolio, which makes up more than 42 percent of the system’s total assets. 

In a statement that echoes recent comments from officials at both the California State Teachers’ Retirement System and the California Public Employees’ Retirement System, Maryland chief investment officer A. Melissa Moye attributed the pension system’s FY2012 performance to “a challenging environment for investors, particularly in international equity”. 

Maryland had a 5.7 percent allocation to private equity at the end of the 2012 fiscal year, well short of the 10 percent target it established two years ago. 

“We still have a ways to go to reach the target,” Golden said. He declined to say whether private equity would be an area of focus for the retirement system in the coming fiscal year.