NM investment funds have seen a slowdown after rapid growth

Copyright © 2022 Albuquerque Journal

SANTA FE – After posting rapid growth for most of the past two years, New Mexico’s pension and endowment funds have seen investment gains stagnate this year due to a market downturn.

But the explosive growth of the state’s Permanent Land Grant Fund in previous years means that large distributions to help fund schools and other state programs are likely to continue for the next few years.

And representatives of the pension funds said on Monday that they are still in a good position to remain solvent in the future, in part because of changes made in recent years.

The New Mexico Teachers Retirement Board, the Educational Retirement Board, was one of the few national pension funds to post a positive investment return for the fiscal year that ended June 30.

While a 1 percent return on investment may not seem like much, the $15.5 billion pension fund beat a national benchmark, thanks in part to an investment mix that includes private real estate and private equity holdings that have performed well over the past ended the year, said ERB’s Chief Investment Officer Bob Jacksha.

“We’re trying to be really well diversified, so whatever happens, we’ll be fine,” Jacksha told the Journal.

The state’s other pension fund, the Public Employees Retirement Association, saw its funded ratio — a figure that compares assets on hand with future benefits owed — improve after the passage of a 2020 bill that changed how calculate some retirement benefits.

The fund could now be on track to be 100 percent funded in the next 50 or 60 years, said pension fund executive director Greg Trujillo.

Like other pension funds, both New Mexico pension funds rely on investment earnings to help make up the difference between benefits due over time and incoming contributions.

Meanwhile, even with recent volatile market conditions, the Permanent Land Grant Fund, which provides annual distributions to New Mexico public schools, hospitals and other beneficiaries, was valued at about $24.4 billion as of June 30 — up from about 19, $7 billion at the end of 2019.

Part of the increase is due to record-high contributions to the fund from the State Land Service, mostly from taxes and royalties collected from the oil and gas industry.

State Investments Officer Steve Moise told members of an interim legislative committee Monday that high inflows have helped the state’s largest endowment fund weather the recent market downturn, which meant a negative 2.2 percent investment performance in the last fiscal year.

“We’re seeing record inflows with new records being set frequently,” Moyes told members of the Legislature’s Investments and Pensions Oversight Committee during a meeting at the Roundhouse.

Overall, he said the State Board of Investment now oversees roughly $38.8 billion in total investment, a figure that also includes a state “black day” fund designed to hold some revenue from cash-flow years for future revenue declines .

“Funds have boomed over the last decade – it’s no secret,” Moyes said.

The recent growth in the Permanent Land Grant Fund comes as voters statewide are poised to decide the fate of a proposal to take more money from the fund for early childhood programs and other education programs that could include an extended school year.

The proposed constitutional amendment will appear on the Nov. 8 general election ballot after being approved by lawmakers last year.

As for the two state pension funds, PERA covers about 47,700 state employees, municipal employees, judges, firefighters and law enforcement officers. It pays benefits to about 42,700 pensioners.

The ERB, for its part, has approximately 59,000 active members, including teachers, school administrators and university professors.

Leave a Comment