El Paso pension fund posts about 2.5% January gain; board hears rebalance, private-equity pacing

The El Paso City pension trust reported a roughly 2.5% investment return for January — about $25.9 million — and a total trust market value just over $1 billion, an investment consultant told trustees at the board meeting. Alex, the investment consultant from Callan, said the month’s gains were driven by U.S. equities and a handful of active managers, while fixed-income returns lagged.

The consultant told trustees the plan remains within policy tolerance bands but that natural market movement and large recent distributions left the fund temporarily overweight in cash. "January was a really good month. I think it's about 2.5% return, which translates really into $25,920,000," Alex said. He recommended rebalancing as cash flows permit rather than forcing daily trades.

Why this matters: the board’s long-term actuarial discount rate is 7.25%, and trustees said they watch monthly returns as short-term noise. The consultant emphasized that meaningful signals generally emerge over multi-year horizons and that short-term volatility does not necessarily require changes to the long-term strategy.

Key details and discussion

- Performance drivers: Domestic equities rose nearly 3.5% for the month; active management added roughly 31 basis points to index returns. International equities outperformed the index by nearly 60 basis points, with one manager singled out as a significant contributor. Private equity and real estate continue to be reported on a quarterly basis and are proxied at month-end.

- Fixed income and cash: Fixed income returned slightly above benchmark for the month but has trailed equities over the recent period. The board was told a previously laddered short-term bond portfolio has largely run off, changing the mechanics of future rebalancing.

- Private equity valuation lag: Trustees questioned private-equity underperformance on 1- and 3-year horizons. Alex explained that private-equity valuations lag public markets because managers often carry investments at book value until transactions realize gains. "Private equity for the last, say, 3 years, 4 years, has not tracked as closely to public equity markets as it has in the past," Alex said, noting fewer transactions and a slower deal pace since COVID.

- Secondaries and pacing: Trustees asked how many secondary funds the plan holds and whether reinvestment is automatic. Alex said the plan is invested in multiple PASF secondary funds and that new commitments are not automatic. "Callan does a pacing analysis, from time to time. The pacing analysis will... set the time period when we need to add more commitment to primaries and secondaries," Alex said. The board previously approved a pacing commitment of approximately $60,000,000 (roughly $30 million to primaries and $30 million to secondaries), and future commitments require board approval when proposed by the investment committee.

Context and background

Trustees discussed macro factors that affect month-to-month returns: presidential-election resolution effects, tariff and inflation headlines, and episodic technology-sector moves that can produce outsized single-day market swings. Alex noted an example of a large single-day move in a major semiconductor company as an illustration of market noise.

Ending

The board did not change the long-term strategy during this meeting; staff and the investment committee said they will bring pacing and rebalancing recommendations back to the committee and board as transaction windows and cash-flow needs permit. The consultant and staff answered trustee questions about manager meetings, cash-flow timing, and the mechanics of committing to new private-equity funds.