By PHIL KABLER
CHARLESTON, W.Va. — With a 15.8 percent return on investments, the state Investment Management Board outperformed other state investment funds during the 2016-17 budget year.
“As far as I know, we’re the best-performing state in the country, at 15.8 percent,” said Craig Slaughter, IMB executive director. “Across the country, I think it stands out.”
He said median performance for state investment plans was in the 12.5 percent to 13 percent range for the fiscal year.
West Virginia is also in the top 20 percent of states for 10-year investment performance, he said.
Fueled by a strong stock market, the state’s investment portfolio grew by $1.57 billion during the budget year, from $16.72 billion on June 30, 2016, to $18.29 billion on June 30, 2017.
Since July 1, 2011, the portfolio has grown $5.43 billion, from $12.85 billion.
That strong performance is carrying over in the first quarter of the 2017-18 budget year, with about a 3.5 percent return.
Through the end of August, the fund had grown by another $374 million to $18.66 billion.
About 81 percent of those assets are in pension funds, including $7.36 billion in the Teachers Retirement System, and $6.44 billion in the Public Employees Retirement System.
“September was also a pretty good month,” Slaughter said. Final financial numbers for the month are not yet available.
However, he offered a caveat that the market’s modest but “very, very long expansion” cannot go on indefinitely.
“The world works in cycles and in the near term, I think you should fully expect a recession of some kind and a downturn in the market. I can’t predict when that will occur,” Slaughter said.
In anticipation, Slaughter said the IMB is reducing its exposure to stocks.
“We’re gradually reducing our equity allocation by 5 percent,” he said.
That part of the portfolio will be replaced primarily with private credit investments, which essentially are loans to corporations.
Slaughter said the advantages are that the investments are relatively short term, 3- to 5-year notes, and have variable interest rates, which is critical in anticipation of rising interest rates.
The IMB doesn’t always strike gold, however. Just a year ago, it ended the 2015-16 budget year with a loss of $470 million, or minus 0.4 percent. That was after interest rates did not increase as quickly as IMB advisors had projected, resulting in losses on fixed income securities.
Reach Phil Kabler at [email protected], 304 348-1220 or follow @PhilKabler on Twitter.
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