PIERRE, S.D. (KELO) — South Dakota’s public-pension system saw gains from stocks that were bought at low prices on Christmas Eve morning and sold weeks later after they had gained about 20 percent in market value, state investment officer Matt Clark said Friday.
Clark told KELOLAND News in an interview the move into and back out of certain stocks helped the return reach “2.5 to 3 percent” through the first nine months of the state fiscal year.
“That contributed positively to the performance and made up for most of the stock portfolios under-performing,” he said.
Assets totaled nearly $12.25 billion as of March 31 and likely won’t reach the annual 6.5 percent target set for the South Dakota Retirement System, according to Clark.
“We’re clearly not on pace to make the 6.5 this year,” he said.
The 2019 fiscal year ends June 30. The system’s investments finished higher the past two years at 7.9 percent for 2018 and 13.8 percent for 2017.
SDRS trustees received a briefing from Clark at their quarterly meeting Thursday in Fort Pierre. He spoke in more detail during the Friday interview.
The state investment office takes a contrarian approach, buying when prices fall and selling when prices reach levels the staff has determined reflect actual values.
The investment staff’s normal mix of stocks and bonds is 70-30. Their stock investments for many months had been at 50 percent because prices were high.
An opportunity came on December 19 when stock prices generally fell to only “a little over value,” Clark said. That led his office to increase stock holdings to 56.6 percent.
Prices fell farther on the morning of December 24 – “They were collapsing,” Clark said – and his team increased its stock holdings to 63.3 percent.
“I joked then in an email to the board it was the best Christmas present I ever got,” he said.
As stock markets rebounded, the investment office saw gains of 20 percent or more, and Clark’s team began selling down to the 56.6 percent level.
“Now we’re one step above our most conservative stop,” he said.
The state Investment Council’s range goes as high as 85 percent in stocks.
The council works with the retirement system’s trustees.
The 17 trustees include 14 who are elected by their respective groups of state, county and municipal employees, teachers, school boards, city and county elected officials, law enforcement, regents employees, judicial employees and retirees.
The governor has two appointees and the state’s chief investment officer, who currently is Clark, is automatically a member.
State government and its various sub-branches automatically participate in the system. Local governments and school boards have the option whether to take part. The Legislature sets laws governing the system.
There are more than 88,000 members in the system, including more than 41,000 who are active contributors and more than 28,000 people receiving benefits. As of the June 30 end of the 2018 budget year, the system had more than $12 billion invested and, for the year, had collected nearly $250 million and paid more than $540 million in benefits,