Hartford, Connecticut – The state pension fund’s performance has recently hit an all-time high of $55 billion, as Wall Street continues to achieve record-breaking success. Throughout the 2023 calendar year, the pension funds experienced a notable increase of 12.8%, propelling Connecticut to higher ranks nationally.
In a recent study conducted by the Yale School of Management, it was revealed that Connecticut had experienced a significant turnaround from previously being ranked as the second-worst pension fund in the United States. Over a five-year period from 2017 to 2022, the annualized return was 5.8%, less than half of the leading state, Washington. The state’s ranking improved, surpassing only South Carolina in the survey.
Legislators held a forum with State Treasurer Erick Russell and top Yale officials to address the state’s past poor performance and more recent progress. The challenges faced by the pension fund, including being the only public pension fund in the nation to lose money in 2012, were scrutinized. The turnover in key positions, such as the chief investment officer, was identified as a significant issue during a 12-year period with 10 different officers in that crucial role.
Notably, Professor Jeffrey A. Sonnenfeld of the Yale School of Management commended Treasurer Russell for overseeing a remarkable turnaround since assuming his role in January 2023. Sonnenfeld highlighted the positive direction the pension funds are moving towards, acknowledging the work that has been done while emphasizing the need for continued improvement.
One of the critical developments in recent years has been the increase in state budget surpluses, allowing for an additional $7.7 billion allocation to the underfunded pension funds. As a result, the state employee pension fund is now funded at 52%, with teachers at nearly 60% and municipal employees at 74% as of June 2022.
Yale recommendations included hiring top money managers, reducing fees paid to outside managers, and adjusting asset allocation to maximize returns. Connecticut’s pension funds have seen improved rankings but still have room for enhancement, as highlighted by the analysis provided by Yale researchers and officials.
State officials, legislators, and Yale analysts continue to collaborate to ensure sustainable growth and performance of Connecticut’s pension funds. Despite past challenges, concerted efforts are being made to optimize investments and secure the financial future of state and municipal employees, teachers, retirees, and survivors.