Chicago Firemen returns -14.2% for fiscal year

Chicago Firemen's Annuity & Benefit Fund posted a gross return of -14.2% for the fiscal year ended Dec. 31, a major setback for the severely underfunded $900 million pension fund.

The pension fund's return fell short of its policy benchmark return of -13.6% for the period, according to an investment report on its website.

The report does not disclose the potential impact on its funding ratio, which was 20.9% as of Dec. 31, 2021, according to its latest actuarial valuation. In the valuation report, actuarial consultant Segal Group said "even under the statutory funding schedule, the funded ratio is projected to remain below 50% through 2041."

The statutory city contribution for 2023 is $399 million, which increases to $428 million in 2024 and thereafter will be about 74.5% of total projected payroll on an annual basis.

The firm issued the warning after the pension fund posted a strong return of 11.4% for the year ended Dec. 31, 2021.

For the three, five and 10 years ended Dec. 31, the pension fund returned an annualized gross 3.4%, 4.7% and 7.4%, respectively, compared with their respective benchmarks of 3.9%, 5% and 7%.

For the most recent year, the pension fund's negative return reflected a challenging market environment. For the year ended Dec. 31, the Russell 3000 index and Bloomberg U.S. Aggregate Bond index returned -19.2% and -13%, respectively.

For that period, every asset class posted negative returns. The best performer was private equity, which returned a gross -2.3% (below its benchmark of 2.6%), followed by real estate at -9.6% (benchmark -8.5%); fixed income, -11.5% (-13%); domestic equities, -17.4% (-19.2%); international equities, -17.7% (-16.6%); and liquid diversifying assets, -18% (6.1%).

As of Dec. 31, the actual allocation was 35.5% domestic equities, 24.7% fixed income, 23.9% international equities, 8.6% real estate, 3.6% private equity, 2.1% liquid diversifying assets, 1.1% infrastructure, 0.4% private credit and the rest in cash.