In our 2022 Annual Report we talked about the phenomenal increase in the balance sheet managed by sovereign investors since the start of the pandemic. In particular, US-based public pension funds have benefitted from the boom in equity markets and have been reporting extraordinary results for the 2021 fiscal year (ending on June 30, 2021).

The increase in assets has undoubtedly improved the health of the pension schemes, as measured by the funded ratio, i.e., the ability of the assets to cover all future liabilities. The world’s largest state-level PPF, CalPERS, reported a 21.3% return and a US$ 92 billion growth in assets for FY21 – which increased its funded ratio by 10 bps to 80%.

But what has this meant for other funds and states, and what is the current situation across the US – which remains the world’s largest country in terms of sovereign capital? Certain organizations including NASRA and the PEW Trusts issue regular analyses, but we decided to carry out an update with the primary source: the funds’ actuarial valuations.


Every year, Public Pension Funds carry out an actuarial valuation of their assets (actuarial value of assets, or AVA) and liabilities (actuarial accrued liability, or AAL). The former can be different from the book value of the assets and from their market value, which we normally refer to as assets under management (AuM).

The comparison of AVA and AAL indicates the health of the pension plan: their difference is the unfunded accrued liability, or UAL; and their division is the funded ratio. Such values are largely affected by the discount rate or expected investment return (the lower the rate, the larger the UAL), which is currently 5.5% to 7.8% for all US funds.

We analyzed all 210 retirement schemes registered at NASRA. The largest 133 of them can be grouped into 87 managers (e.g., the NYS Common Retirement Fund administers the NYSLRS including ERS and PFRS). The other 77 funds, representing 3% of the assets, are smaller county or city-level schemes and were disregarded for this analysis.


There is a large disparity in the health of pension schemes across the country, from the 39% of New Jersey’s Division of Investment (least healthy) to the 106% of the South Dakota Investment Council (most healthy). The largest states by pensions, California, New York and Texas, have improved their funded ratios to 77%, 91% and 81%, respectively.

However, the funded ratios are still unsatisfactory, and the US average remains at 75% with a US$ 1.3 trillion total shortfall. For comparison purposes, most Canadian pension plans are fully funded, with a 105% national average. To make things worse, the working population is expected to decrease from 64% to 57% by the end of the 21st century. In this context, US PPFs may have no choice but to apply more aggressive investment strategies in the years to come.