Return to search

Pennsylvania pension loses 22% on real estate investments during 2008

The $22bn state workers' pension fund lost 14.8% on its real estate portfolio in the fourth quarter of 2008, and 16.5% on private equity during the same period.

Pennsylvania State Employees' Retirement System reported losses of 14.8 percent on its real estate investments in the final quarter of last year – and overall losses of 22 percent for the whole of 2008.

Reporting first quarter results, the $22 billion pension (SERS) said it lost 7.5 percent for its entire portfolio during the first three months of 2009.

However, owing to the lag in reporting real estate and private equity returns, the pension said it was only able to report full-year and final quarter results for the two asset classes. SERS’ private equity investments lost 26 percent during 2008 – and returned -16.5 percent in the last three months of the year.

Real estate accounts for 11 percent of the pension fund’s portfolio, while private equity makes up 23 percent.

As a result, Pennsylvania has lowered its assumed rate of return on investments to 8 percent from 8.5 percent, and expects to significantly increase its employer contribution rate to as much as 31 percent by 2013/14.

SERS board chairman Nicholas Maiale said in a statement it was “no longer realistic” to assume the pension could earn an average, long-term, return of 8.5 percent.

The pension has invested in a raft of private equity real estate fund managers including The Blackstone Group, Colony Capital, Goldman Sachs’ Whitehall Street Funds, Lubert-Adler Real Estate, Rockpoint Group, Prudential, Starwood Capital and Westbrook Partners, according to the fund’s website.