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Morgan Stanley reports double-digit fiscal-year returns and flags "higher rates for longer" to Old Saybrook trustees
Summary
Morgan Stanley told trustees the town's pension portfolio has produced double-digit fiscal-year returns (about 10–11%) and an all-time high balance, while warning of possible inflation pressure and a continued higher-rate environment; managers' relative performance and allocation choices were discussed.
Morgan Stanley presented the pension and related plan performance to Old Saybrook trustees, reporting double-digit fiscal-year returns, an all-time high aggregate balance and a cautious outlook that expects rates to remain elevated.
The Morgan Stanley presenter reported the total plan balance was "just over $31.5 million" with a fiscal-year gross return of about 11.13% and net performance trailing benchmarks in some measured periods. Month-to-date performance showed small declines; Morgan Stanley said the fiscal-year gain remains solid despite recent volatility. The presenter explained manager-level results, noting some active managers underperformed while fixed-income positioning and short-term bonds helped performance. The firm also highlighted portfolio diversification and a lower standard deviation relative to benchmarks.
On outlook, Morgan Stanley said it expects "higher rates for longer" and noted geopolitical developments as an inflation risk: "We still think inflation is going to tick up because of some of the residual effects from the war in Iran." The presenter also referenced a 12-month S&P 500 price target of 300 as part of the firm’s internal outlook, and described a cautious tilt toward equal-weight exposures to temper concentration risk in market-cap-weighted indices.
Trustees asked questions about manager trimming, allocations between growth and value, and the impact of new large-cap entrants (for example, anticipated AI-related listings) on index concentration and active management decisions. Morgan Stanley said it has taken steps such as adding an index component to offset manager underperformance and is monitoring index composition changes.
The trustees heard a separate but related briefing on the town's fire pension portfolio (a smaller, more conservative 60/40-style portfolio) and were told it also enjoyed a strong fiscal-year return and lower volatility than the larger pension fund.
The meeting closed with administrative items and a recess for the summer; trustees noted the next meeting in September.
