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Wilshire: Pension fund 10-year annualized return 8.3%; Q4 outperforms policy amid rebalancing
Summary
Wilshire Advisors told the San Francisco retirement board the fund returned an annualized 8.3% over 10 years, the funded ratio is about 95%, and the portfolio outperformed its policy benchmark in the fourth quarter as staff continues a multi-year rebalancing toward the board’s strategic allocation.
Wilshire Advisors presented fourth-quarter performance for the retirement fund at the San Francisco Retirement Board meeting, telling commissioners the portfolio’s 10-year annualized return was about 8.3% and the fund’s market value was roughly $36 billion.
The portfolio’s funded ratio stood at about 95% and the firm highlighted a negative spending ratio of roughly 3.1%, a measure the board said it is monitoring as staff manages liquidity and benefit payments. Tom Toth of Wilshire Advisors said the fund “performed reasonably in line with policy” over longer horizons and that the portfolio outperformed the policy benchmark for the quarter by about 74 basis points.
The presentation outlined which asset groups drove results. Public equity was a relative outperformer in the quarter, private equity contributed positively on both an absolute and relative basis, while real assets detracted. Wilshire said public credit had an absolute drag but nevertheless outperformed its policy benchmark in the quarter. On longer horizons Wilshire reported that private-equity benchmarking and valuation issues have weighed on selection attribution.
In attribution for the trailing five-year period Wilshire identified two material asset-allocation effects that added value — an overweight to private equity and an underweight to U.S. Treasuries — each contributing on the order of about 40 basis points. By contrast, the selection component (manager and benchmark effects) was a headwind, with private-equity selection driven in part by benchmarking noise.
Wilshire noted market risks tied to concentrated equity leadership: the largest tech names (“mega-cap growth”) have driven much of recent equity returns, creating concentration risk the firm said it watches when setting policy benchmarks and when discussing implementation with staff.
The board asked questions after the presentation; commissioners and staff discussed benchmarking choices (market-cap weighted vs. equal-weighted comparisons) and implementation steps staff is taking to rotate allocations. No public commenters spoke on this item.
