The North Carolina pension fund’s $27 billion stock portfolio lost nearly $200 million in the year that ended June 30, partly because it included holdings in four scandal-plagued companies.
About half that stock loss came from investments in now-bankrupt WorldCom, with the rest coming from Enron, Tyco and AOL Time Warner.
The loss represents less than 1 percent of the pension fund’s stock holdings at a time many stock funds have lost a third of their value.
Overall, North Carolina’s pension fund – the 10th largest in the country – lost 4 percent of its value during the 12 months ending June 30, largely on the back of a continued stock slump, The Business Journal of Raleigh reported.
“While we are very concerned about everything that’s happened on Wall Street, our pension fund in North Carolina has suffered very little as a result of the marquee fiascos,” State Treasurer Richard Moore said Monday.
The pension funds lost nothing from bond investments, Moore said. About half of the state pension fund’s $52 billion total value is invested in stocks, with about 47 percent in bonds and about 3 percent in real estate.
“We’ve practiced what we’ve been preaching about diversity,” said Moore, whose office manages the pension fund.
The battering of Wall Street over the past two years hit public pension funds hard even before this summer’s big market tumble. State pension plans with more than $10 billion under management lost about 6 percent of their value in the 12 months ending June 30, according to a survey of 93 retirement systems by the investment consulting firm Wilshire Associates.
North Carolina’s public employees retirement system is among the best financed in the country, the Wilshire survey found. Assets held by the state’s funds are sufficient to cover 130 percent of pension liabilities, the survey found.
About 150,000 state and municipal retirees draw benefits from the state’s pension funds, while another half-million or so pay into the funds, Moore said.
An insider put the pension fund’s loss in Tyco and AOL Time Warner at about $40 million each. Pension fund administrators sold all stock in Enron before the energy trader’s Jan. 9, 2002, bankruptcy announcement, limiting the loss to about $15 million.
The fund continues to hold 9.3 million shares of AOL Time Warner and 4.12 million shares of Tyco, which means that any losses recorded in prior selloffs could be made up if either company rebounds.
“Tyco is selling at about $15 these days,” state investment director Andy Silton said. “If it went up to $22, we could start to take care of those losses.”
The state’s paper position in both companies remains depressed, though. As of June 30, 2001, pension holdings in AOL Time Warner stood at $538 million. A year later, the figure was $140 million.
In Tyco, the state’s holdings were valued at $364 million in 2001. Today, the value is $58 million.
“Everybody can understand the Internet bubble, but Tyco was a mainstream company,” Silton said. “How it worked, how management ended up extracting hundreds of millions in options is one of those important lessons of the 1990s. And it’s something that continues to undermine investor confidence.”