Maryland pension fund had good year, but underperforms other big funds

By Len Lazarick

Pension system logoThe Maryland pension system had a good year in fiscal 2011, earning 20% on its investments — up from 14% in 2010 — and giving it $37.6 billion in assets.

But the Maryland system did not perform as well as most large pension systems around the country, showing earnings worse than four out of five of them, according to a report from the Department of Legislative Services.

“The main reasons for the system’s underperformance relative to most other large public pension plans is its relative underweight in public equities,” said Michael Rubenstein, the legislature’s chief pension analyst.

According to the Trust Universe Comparison Service, pension funds with more than $25 billion in assets have an average 52% of their holdings in public stocks. Maryland’s system has only 47% in public equities.

The 12 months that ended on June 30 was a particularly good time for stocks, so the more stocks in the portfolio, the better the return.

The system’s currency management program also lowered its overall performance by 1%.

Chief Investment Officer Melissa Moye said that both the system’s position in owning fewer stocks than other large funds and hedging its currency transactions were defensive measures that should serve the state well during the current volatility in the stock market, especially with the problems related to the euro and European debt. Moye was appointed to the position in July after acting in the role for much of the fiscal year.

The system has a target performance of 7.75% return on investment, so it has far exceeded those goals in the past two years. But investment losses in four of the last 10 years still leave the state with at least $17 billion in unfunded liabilities it has promised state employees and teachers.

About The Author

Len Lazarick

Len Lazarick was the founding editor and publisher of and is currently the president of its nonprofit corporation and chairman of its board He was formerly the State House bureau chief of the daily Baltimore Examiner from its start in April 2006 to its demise in February 2009. He was a copy editor on the national desk of the Washington Post for eight years before that, and has spent decades covering Maryland politics and government.


  1. SmileyMyrus

    20%?! My retirement funds are *down* 20%– where are they investing?

  2. Whcampbell

    Even with outstanding investment results the Maryland State pesion funds are unlikely to ever be fully funded.  After a decade of sub par performance it will be almost impossible to catch up to the unrealistic return of a 7.75% average.  Changing investment classes may provide slight improvements on the results, but the primary cause remains the same—the Corridor Funding of the pensions.  We need to do away with Corridor Funding and have the State pay the actuarially recommendended contribution annually.  We also should reduce our investment return target to 6.25-6.50%.  The current charade is unfair to both the taxpayers and our employees.  In years when that is not possible, we should add the shortfall to our oustanding debt total; just like the credit rating agencies do.  Governor O’Malley and the General Assembly continue to avoid the hard chouces.  Either fully fund the pensions, or change to a less costly system. 

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