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Md. pension system is sound due to bonds, global stocks

The Baltimore Sun

Assets owned by the Maryland State Retirement and Pension System gained 1.56 percent in value for the six months that ended Dec. 31, a report shows. That's not a bad result during a tumultuous period. Credit bonds and international stocks.

The fund that finances retirement income for teachers, police and other public employees is more diversified than it used to be. Standard & Poor's index of 500 big U.S. stocks delivered a negative return of 2.7 percent for the period. Seven years ago, U.S. stocks made up 48 percent of the portfolio. Now they're only 41 percent.

In 2000, the system's assets were 21 percent international stocks; now they're 23 percent. Foreign stocks have done much better than American stocks recently because, for the most part, overseas economies are still growing quickly and have avoided a U.S.-style housing collapse.

In 2000, bonds and other fixed-income investments made up 24 percent of the pension system's portfolio, thanks to the 1990s bull market in stocks, which made the bond position proportionally smaller. Now the portfolio is 30 percent bonds, which are far less volatile than stocks.

The system does have, however, a 5 percent position in real estate and real estate-related investments. That's up from 3.8 percent in 2000, and real estate did not have a good 2007.

The system runs on the state fiscal year, which ends June 30. If the markets behave for the next six months as they did for the last six, this could be the fund's lowest-return fiscal year since FY 2003, when it gained 3.2 percent. Still, no reason for alarm. A quick glance suggests the fund is in good shape.

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