US - North Carolina Retirement Systems gained 7.94% in the third quarter, falling short its target benchmark by 11 basis points.
Global equity gave the highest return of 12.99% trailing its benchmark of 13.15%, The nascent inflation asset class lost 20.88% in the quarter, while the benchmark was up 1.4%. The pension fund report said poor returns in inflation-related assets were due to a more conservative valuation being applied to a timber investment, which is the largest holding in the portfolio.
Alternatives returned 1.68% and exceeded its benchmark performance of -7.47%.
Fixed income also exceeded its target of 4.05% by 10 basis points. Bond markets gave strong returns thanks to declining interest rates and tightening credit spreads with corporate bonds being the strongest performer in the investment grade fixed income market, the report said.
Real estate rose 3.54% giving its first positive return of the year but still missed its benchmark of 5.71%. State treasurer Janet Cowell said the real estate markets have reached a trough and are expected to rebound with the broader economy.
Overall, the pension fund returned 9.44% against its benchmark of 9.89% for the year ending September 30, 2010, up from a 3.11% return against a 2.39% benchmark for the previous year. Total assets increased to $69.7bn from $65.8bn in the same time period.
Three year performance found global equities returned -6.45% versus a -7.22% benchmark; fixed income rose 9.90% against 9.08%; real estate returned -15.04% against -10.30%; alternatives returned -2.16% versus -3.02%; giving a total return of -0.36% against its -0.43% benchmark.
Cowell commented: "While markets recover and the possibility of a double-dip recession decreases, we still face an economy where return expectations are lower than they have been historically. We will maintain a long term view and continue work to minimize risk."
The fund has a 50.2% allocation to global equities, 38.1% in fixed income, 4.4% in real estate, 5.1% in alternatives, 1.3% in credit and 0.8% in inflation.
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