As the new year began, the city’s three pension funds together totaled $515 million, more than officials will likely need to pay off future obligations.
But city leaders are worried because figuring out where to stash all that cash is difficult.
The Retirement Board that oversees the investments has generally followed conventional wisdom and divvied up the money among stocks, bonds, real estate, hedge funds and more.
Members of the panel aim to keep the funds growing year in and year out so that Bristol can continue to get by without shoveling more taxpayer cash into the accounts — something the city has been able to do for a decade now thanks to wise investing in the prior two decades
This year, though, poses particular headaches.
The city’s financial advisor, John Beirne, who has guided the Retirement Board’s choices all along, said these “are difficult times” and figuring out where to make money is tougher than ever.
“There’s not very much good news as we start the year out,” Beirne told panel members recently, as the stock and bond markets look iffy.
Beirne said that all the federal stimulus money that helped push the economy along is now gone. Combined with international worries, especially the debt crisis in Europe, it has the affect of dragging down markets, he said.
Beirne said that, historically speaking, the best year of any president’s term is the third one and that in the fourth, things tend to slow somewhat, another worry heading into President Barack Obama’s re-election year.
In addition, he said, the market is dealing with an unusual degree of volatility and leverage.
Beirne said there has been “a nice rally” in stocks since last summer’s big selloff, but it was driven mostly by established companies that pay good dividends — money that looked particularly good when interest rates were so low that they barely registered.
He said the U.S. economy is doing the best in the world now, but he’s skeptical that a boom is at hand. Instead, he said, the slow-growth consensus is probably right.
There is too much debt dragging things down, Beirne said.
He said that everyone knows the long-term answer: economic growth, some inflation, entitlement reforms and raising taxes.
Taken together, according to Beirne, it will devalue debt and raise asset values.
“There’s no quick elixir,” he said.
The city is putting some of its investment money into gold-related stocks, hoping to take advantage of a strong market for gold, which tends to do well in periods of uncertainty.
The city’s effort to bolster its pension fund began under Republican Mayor Mike Werner and continued through every administration since, a program that has had strong bipartisan support that probably accounts for some of its success.
There are many towns in Connecticut and across the country whose pension funds are far short of the amount they need to pay off future retirees and others who only got the necessary money by borrowing it — so that taxpayers are not only paying to keep up current pension investments but are also chipping in to pay off the debt for investments that weren’t made in the past.