Nov 6 Investments made by U.S. public pensions achieved median returns of 4.67 percent in the third quarter of 2012, after posting losses of 1.73 percent in the second quarter, according to a Wilshire Associates report released on Tuesday.
But returns in the latest quarter lagged median gains of 7.5 percent in the year's first quarter.
State and local pension funds with assets greater than $1 billion achieved returns of 4.53 percent in the quarter ended Sept. 30, while the median return rate was 4.48 percent for funds with assets topping $5 billion, Wilshire said.
Many of the political fights over providing pensions to public employees hang on the returns from pension fund investments. When investment returns are low, cities, counties and states must pitch in more money to cover benefits, essentially creating a greater burden for taxpayers.
The financial crisis, coupled with the state and local government budget crises, caused fund shortfalls over the last few years. The Wilshire report showed that fund returns are slowly healing.
For the year ended Sept. 30, public pension investments saw a median return of 16.68 percent and for three years ending Sept. 30, the median return was 9.31 percent. At the 10-year mark, the median return for the largest public pension funds was 8.22 percent, surpassing the 8 percent level for the first time since the second quarter of 2007, according to a Wilshire spokeswoman.
Most state public retirement systems set their investment rate of return target at 8 percent, according to the Pew Center on the States' June pension report.
The median return for all public funds over five years, which encompassed the worst U.S. economic downturn since the Great Depression, was a mere 2.33 percent, and for funds with assets greater than $5 billion it was 2.10 percent.