Real estate profits fall for state pensions

The return on real estate holdings in a state pension fund fell by half in the past fiscal year, but real estate remained a top earner for the shrinking fund, the State Comptroller’s Office said today.

The $9 billion equity real estate portion of the $153.9 billion fund grew by 14 percent in the 2007-2008 fiscal year, which ended March 31, compared to an increase of 31 percent the year before, agency spokesman Jim Fuchs said.

Real estate trailed only the 24 percent return from private equity, the fund’s top earner of eight asset categories.

Overall, the New York State Common Retirement Fund shrank from $154.5 billion to $153.9 billion, while the return on investments grew by 2.56 percent. The fund contracted despite a positive return because of the $6.9 billion paid out to retirees.

Comptroller Thomas DiNapoli plans to push for legislation later this year that would allow the funds to invest more in real estate and private equity, which are classified as alternative investments and capped at 25 percent of the fund, Fuchs said.

Fuchs attributed the relatively strong earnings in real estate to the lack of exposure in the fund to risky investment products such as mortgaged-backed collateralized debt obligations, which fell off dramatically during the credit crisis.