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Laxman Pai, Opalesque Asia:

State and municipal pension funds have more money in alternative investments like private equity, real estate, and hedge funds than at any point in history - both in dollar terms ($1.63 trillion) and share of asset allocations (34.0%), said a study.

Markdowns to these asset classes in 2023 emphasize how exposed public pensions are to "valuation risk", pointed out Equable Institute's "State of Pensions 2023" report.

According to Anthony Randazzo, Equable Institute executive director, the increasing addiction to investment risk has meant exposing public employee retirement assets to the volatility of highly interconnected global markets.

In just the past fiscal year, asset values were shaken by rapidly changing interest rates, a crypto-economy crisis (capped by the collapse of FTX), a community bank crisis (marked by the failure of SVB Financial), an unexpected A.I.-driven market rebound, and more, he said.

"Beyond volatility, the heavy expansion into alternative asset classes that don't have robustly transparent market prices - like private equity and real estate - means that each retirement system needs to start accounting for the amount of 'valuation risk' that their portfolio poses to the state and local government budgets in their jurisdiction. All of these trends complicate the long-term outlook for plans," Anthony added.

US public pensions will likely miss their investment target......................

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