You asked (1) which states give the state treasurer sole authority to invest state pension funds and which have investment boards or committees and (2) how the investment performance of Connecticut's pension funds compares to that of states that give investment authority to a committee or board.

Connecticut's state treasurer is responsible for investing state funds, including state pension funds, but she must do so according to an approved state investment policy. The treasurer recommends the policy and it is approved by the Investment Advisory Council (IAC), a 12-member committee with 10 members appointed by the governor and legislative leaders plus the treasurer and the Office of Policy and Management secretary as ex officio members. The investment policy sets standards for investing state trust funds, including, for each fund, investment objectives, asset allocation policies, and risk tolerance. The investment policy and the treasurer's investments must also conform to statutory constraints that limit the percentage of state funds invested in common stock and investment in companies doing business in specified countries. In addition, the IAC must specifically approve any private equity or real estate investment by a “lame duck” or acting treasurer (CGS § 3-13d)

According to the National Association of State Treasurers (NAST), of the other 49 states, nine give the state treasurer authority to determine the investment policy for state funds; eight share authority between the treasurer and an investment board; one shares authority between the treasurer and the legislature; and 21 states give authority to an investment board. A list of the states in each category appears in Table 1 below.

Of the 50 state treasurers, only 16 are responsible for investing state pension funds. Of the 16 states, eight have investment policy boards and eight give investment policy authority to the treasurer.

Extensive computer searches failed to yield any recent, publicly available state-by-state listing of public pension fund investment returns or other investment performance ratings or comparisons for any recent year. Thus, for the information in this report we relied on annual pension fund financial reports posted on state websites. Overall investment returns are highly dependent on the types and percentages of investment assets that make up each fund. These “asset allocations” vary from state-to-state. In addition, states use different methods to calculate investment returns.

Of the 16 states, 13 have posted investment results for FY 07. (In most cases, these are the most recent performance figures available.) Some also show data for FY 08. Of the 13, eight have investment policy boards and five do not.

Table 2 shows the reported investment performance of the 13 states' pension funds for the fiscal year ending June 30, 2007. Table 3 shows 2008 performance data for the five states for which it is available. We also include three commonly used indexes of investment performance for the corresponding periods: Standard and Poor's (S&P) 500 (a stock index), the Lehman Brothers' Aggregate Bond Index, and the 90-day Treasury bill index.

In each table, states where investment policy is determined by the treasurer alone are marked with a “T” and those that have an investment board determining policy or sharing the decisions with the treasurer are marked with a “B.” Where the information is available, we also note whether the returns are calculated before or after deducting (gross or net of) management fees. Returns calculated before deducting fees are slightly higher.

(NA=Not Available)

*The Pennsylvania State Employees Retirement System has a fiscal year that corresponds with the calendar year so this return is for the year ending December 31, 2007

+ Rhode Island's three- and five-year returns are available only for the periods ending 6/30/06 and are 14.6% for the three years and 7.5% for the five years ending on that date.

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