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Top-performing pension fund managers talk strategy

Nashville, Tennessee
Jumper | Photodisc | Getty Images
Nashville, Tennessee

Some of the best investment strategies don't come from Wall Street—they come from public pension funds.

The top performing state and city pension fund in 2013 was the City of Jacksonville Retirement System with a return of 22.3 percent, according to investment research firm Morningstar.

"What we've done in the last 12 to 24 months is we've taken profits and sold out of our corporate bond portfolio and taken those monies and over-weighted the equity side of the equation," Ronnie Belton, Jacksonville's director of finance and chief financial officer, told CNBC.

Top performing state and city pension plans 2013

Plan
Return
Year End Date
City of Jacksonville Retirement System 22.30% 12/31/2013
Chicago Firemen's Annuity and Benefit Fund 21.90% 12/31/2013
Nevada Judicial Retirement System 19.70% 12/31/2013
Nevada Legislators Retirement System 19.40% 12/31/2013
South Dakota Retirement System 19.00% 6/30/2013
New Hampshire Public Retirement System 18.30% 12/31/2013
Nashville and Davidson County Metro 18.30% 12/31/2013
Nevada Public Employees Retirement System 18.10% 12/31/2013
Mississippi Public Employees' Retirement System 17.90% 12/31/2013
Oklahoma Teachers' Retirement System 17.80% 6/30/2013
Source: Morningstar

Belton's strategy this year, he said, is to take some profits in large-caps and small-caps and look for opportunities in emerging markets.

Nevada had three public pension funds in Morningstar's top 10. The Nevada Judicial Retirement System fund ranked third on the list, with a return of 19.7 percent last year. Nevada Legislators Retirement System was fourth with a return of 19.4 percent, and Nevada Public Employees Retirement System (NVPERS) came in eighth with a return of 18.1 percent.

"We have the simple approach, traditional-focused asset allocation and a lot of indexed funds," said Steve Edmundson, NVPERS chief investment officer, who also runs the other two Nevada-based funds on the list. "Basically we have an overweight to S&P 500, relative to our peer group."

Edmundson's asset allocation is 42 percent domestic stocks, 18 percent large international stocks, 30 percent domestic bonds and 10 percent private markets, which include real estate and private equity.

The Nashville and Davidson County Metropolitan Government Employee Benefit Trust Fund ranked seventh on the Morningstar list, with a return of 18.3 percent. The fund had 15 percent of its assets in alternative fixed income, and that bet paid off big, with an annualized return of 27 percent.

"As European banks or banks in general have been lending less and less to basically reduce their size, we've seen opportunities to lend to energy companies and tech systems. Energy production is a very high, capital-intensive business so we've broadened that group to credit, infrastructure, energy and real estate," said Fadi BouSamra, chief investment officer of the Metropolitan Government of Nashville.

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