STUMP » Articles » Nevada Pensions: Asset Trends » 11 March 2017, 15:37

This sure has been a long week, hasn’t it?

So let’s take apart the asset side of Nevada pensions first. As always, my source is the Public Plans Database, which shows two plans: Nevada Police and Fire, and Nevada Regular Employees. They share commingled funds (as far as I can tell), so I will just be looking at them overall by drawing from the Regular Employees page, which is the much larger plan of the two. The investment allocations and returns are exactly the same, even if cash flows/liabilities differ.

As mentioned in this post, there is something wonky with the average returns calculated by the Public Plans Database. For now, I will ignore that — as mentioned, while the specific numbers are giving me weird results, when I’m making comparisons, it holds up pretty well.

PUBLIC PLANS DATABASE GRAPHS

Let’s start with the simple asset level graph:

Not too shabby — yes, the drop everybody saw in 2008, but other than that, it seems to be pretty steady growth. I did a quick calculation: the market value of assets grew at a 6.65% compound annual growth rate from 2001 to 2015. Of course, that’s reflecting not only investment returns, but the net cash flows of contributions minus benefits/expenses.

Pie chart of allocation percentages compared against industry:

In many ways, the Nevada plans are more conservative in their asset allocations… though one needs to think if the bond holdings are too low, depending on the age distribution. Given what I know about Nevada history, I’m going to assume that their pension plans aren’t too “mature”. But we’ll check that when we get to liability trends.

Line graph of the allocation percentages:

So a comment on the “drift” I’m seeing. I’m wondering if this isn’t the result of simply not rebalancing – just letting the allocation to equities drift upwards as they outperform bonds.

Another note: it just seems they swapped “real estate” for “alternatives”. And, of course, those alternatives could have a heavy real estate component.

MY OWN GRAPHS

First, let’s check out how the assets have performed.

I keep bringing this up, but 5-year and 10-year returns are pretty short-term with respect to pensions. But it doesn’t particularly bode well for the plan that most of the time these averages are below the target of 8%.

Let’s see how the Nevada plans compare against their peer pension plans. These are “large enough” plans to include in the nice graphs I created for pensions with at least $5 billion in assets.

So let me highlight where Nevada falls in the 2001-2015 average returns: (NV is in the orange bar)

And the same for the 10-year calculated returns:

Unlike South Carolina, the asset performance is not the part that’s lacking, either on the 10-year or 15-year basis. They look just peachy re: asset management.

If there’s a problem with NV pensions, it’s not the asset side driving trouble.

UPDATE: Spreadsheet with calculations and data

Compilation of Nevada posts.