Hazzouri

Hazzouri

Tired of ads? Subscribers enjoy a distraction-free reading experience.
Click here to subscribe today or Login.

Luzerne County’s employee pension fund has “weathered relatively well” amid global equity market stress over the impact of the coronavirus, investment adviser Richard J. Hazzouri told the county retirement board in a special update.

Through Friday’s close, the county fund was down 3.39%, compared to global stocks at -9.4% for the year, Hazzouri, of Morgan Stanley, said in the Sunday board report.

“While global equities have been sharply negative, fixed income has had a very positive contribution to returns,” he wrote.

Hazzouri cited three examples of gains from bond managers, along with their fund allocations:

• Wedge Capital, 6%, $26.8 million

• Ryan Labs, 6.5%, $13.3 million

• Delaware Investments, 3%, $6.4 million

The county fund’s year-to-date performance also does not factor in growth from some alternative investments, he said. Morgan Stanley has been in discussions with these managers to firm up their performance estimates, he said.

Although these final numbers are still pending, Hazzouri provided the estimated positive returns for three of these hedge funds along with their county fund allocations:

• Millennium, 1.8%, $12 million

• Axonic, 0.75%, $7.3 million

• AHL Managed Futures, 1.3%, $5.4 million

“While we will not be making any defensive changes in the portfolio at this juncture, our team will be using this near-term volatility as an opportunity to deploy capital into risk assets,” Hazzouri wrote.

Morgan Stanley is willing to meet with the retirement board to discuss current markets, Hazzouri said. The county’s retirement coordinator is in the process of scheduling a meeting next week.

At its last meeting Feb. 19, the board was pleased to learn the fund’s 2019 return was 17.3%, or more than double the 7% target used to calculate annual taxpayer pension subsidy contributions.

Based on the higher return, the actuary lowered this year’s projected subsidy payment from $14.5 million to $14.25 million. The actuary also estimated the annual contribution will range from $14.6 million to $15 million from 2021 through 2024, compared to prior estimates from $15.6 million to $17.2 million for those years.

Hazzouri had cautioned at the Feb. 19 meeting he was predicting “much more muted” returns in 2020, reporting the fund was up 2% at that time.

In his Sunday update, Hazzouri said a growing number of virus cases across the world sparked concerns of a “more pronounced and prolonged effect on the global economy.” With reduced profit estimates from some major companies and Wall Street strategists, markets are in swift correction mode, he said.

“What a difference a week makes,” Hazzouri wrote.

Reach Jennifer Learn-Andes at 570-991-6388 or on Twitter @TLJenLearnAndes.