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.