HELENA – It would take big gains in the stock market over a long period of time to repair beleaguered state pension funds, managers are reporting to the Montana Board of Investments.
Montana’s pension fund assets lost one-fourth of their value during the financial meltdown in 2008 and 2009, Carroll South, executive director of the Montana Board of Investments, told the panel on Wednesday.
For example, South said the combined funds could get back on track in five years if pension investment returns averaged almost 16 percent throughout the period. Over a decade, the investments would have to gain an average of about 12 percent a year.
“We’ve never stated that we can invest our way out of the hole that we’re currently in.” South told the board. “But on the other hand, we don’t want to say unequivocally that we can’t.”
The pension funds are expected to earn about 8 percent a year to meet their obligations. But since 1995, the Montana pension funds’ investment returns have averaged just 6.2 percent annually, hampered by big losses in the current recession and in 2001 and 2002.
“Recoveries from losses are more feasible over longer periods,” South said.
But South said many experts believe the financial meltdown will diminish investment returns for a long time and economic growth will slow.
In the last six months of 2009, money invested for Montana’s largest state pension funds went up about 15 percent after investment fees were subtracted, according to reports.
“They’re better than they were this time last year, but we still have a long way to go to recover,” South said.
A legislative interim committee is studying the issue. However, any proposed changes could only legally affect new employees and not current employees and retirees.