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Pension consultants cite strong 2025 returns, warn of AI concentration and flag one fund on watch
Summary
Fiduciary consultants told the Simsbury Board of Finance that pension portfolios returned about 14% in calendar 2025 and that heavy exposure to large U.S. companies tied to AI poses concentration risk; they placed a real estate fund on watch pending management changes.
Consultants from Fiduciant presented market themes and pension performance to the Board of Finance on Feb. 17, reporting strong calendar-year 2025 returns and outlining risks for the town's pension and OPEB portfolios.
Kate Pizzi of Fiduciant told the board that international stocks outperformed U.S. stocks in 2025, citing a gain "over 30%" for international equities versus about 17% for U.S. large-cap markets, and that bonds also produced positive returns. She said the board’s portfolios benefited from those markets and produced strong returns: "The portfolio returned 14%" for the calendar year, Pizzi said.
Consultants emphasized three near-term themes affecting portfolios: (1) concentration risk tied to substantial exposure to large U.S. companies with artificial-intelligence (AI) sensitivity, (2) elevated market valuations that make selective allocations prudent, and (3) what the presenters called "noise resistance," where markets have remained resilient despite economic headlines. Fiduciant described a modest shift toward higher-quality small- and mid-cap exposure and a slightly increased tilt to international markets in the coming year.
On long-term assumptions, the consultants said expected return assumptions were slightly reduced; their capital market assumptions now imply a pension expected return of about 7.1% (down from ~7.2) while the plan’s discount rate used in liabilities is 6.5%, leaving potential room for actuarial gains to reduce the funding gap over time.
The consultants placed the Barons Court Property Fund (a real estate holding in the portfolio) on watch because of portfolio-management personnel changes; they said they will return after one quarter with a recommendation to maintain, remove or replace the fund.
Board members asked detailed questions about international exposure, the sources of market data, target-date fund allocations, and whether defined-contribution options for town employees were appropriately benchmarked and educationally supported. Consultants said they would provide follow-up information on fee benchmarking and additional performance detail on employee-directed accounts.
The presentation prompted no immediate policy changes; consultants recommended continued monitoring and a report back on the watchlisted fund.
