Return on Massachusetts Public Pension Reform Estimated to be $321 Million, According to New Study from Analysis Group Published in The Journal of Retirement

Date:October 28, 2020
Location:Boston, MA
Contact:Eric Seymour
617 425 8103

The Journal of Retirement published a report written by economists from Analysis Group, one of the largest international economics consulting firms, showing that Massachusetts’s public pension reforms enacted in Chapter 68 of the Acts of 2007 benefited underperforming public pension systems that were consolidated under the commonwealth’s Pension Reserves Investment Management (PRIM).

The Analysis Group team, led by Co-founder Bruce Stangle, Managing Principal Lee Heavner, and Manager Yao Lu, studied data from 105 Massachusetts retirement systems from 2001 to 2016 to evaluate and quantify the gross returns of local systems that transferred their assets to PRIM’s Pension Reserves Investment Trust (PRIT) Fund. The study found that, on average, local systems that transferred assets to PRIT experienced an increase in annual gross returns of 8.9 basis points for every 10% of their assets transferred. This increase in return corresponds to a gain of $321 million, nearly 7% of their total unfunded liability in 2016, as a result of the switch.

“The lessons underscored by our study become that much more powerful amidst the investment uncertainty being experienced due to a prolonged COVID-19 crisis,” said Dr. Stangle. “The simple fact is, PRIT is one of the best performing asset managers in the country for certain asset classes. A recent American Investment Council (AIC) study identified PRIT as having the second-highest annualized 10-year private equity return (net of fees), out of 176 U.S. public pension funds.  PRIM currently has assets under management of approximately $75 billion, which (i) gives it access to investment managers and products that would not otherwise be available, and (ii) allows it to negotiate for far lower fees than smaller local systems.  There are many local systems in Massachusetts that could improve their performance by placing more assets with PRIM. This is especially true in this period of high market volatility.” 

Prior to the Chapter 68 reform legislation, local pensions operated largely independently, and experienced volatility and significant losses. The state government passed Chapter 68 to identify underperforming local systems and require them to cede control of their pension investments to the state’s PRIM.

“The underfunding of pensions is a critical issue in need of solutions. The Chapter 68 Reform provides a case study for the types of reform that could benefit local governments, pension beneficiaries, and taxpayers. We found the data available from the public pensions to be surprisingly limited, and we encourage more transparency in this respect,” said Dr. Heavner. “The data that were available show that local pensions that transferred assets to control by PRIM experienced a significant increase in returns. This increase in returns is consistent with the intent of providing more security to public employees in those municipalities with pension systems that have historically performed poorly. These results indicate that similar reforms could benefit other pension systems as well.”

The study, State vs. Local Management of Pension Assets: Effects of the Massachusetts Chapter 68 Public Pension Reform, was an independent project without funding from, or affiliation with, any third party.

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About Analysis Group:

Analysis Group is one of the largest international economics consulting firms, with more than 1,000 professionals across 14 offices in North America, Europe, and Asia. Since 1981, we have provided expertise in economics, finance, health care analytics, and strategy to top law firms, Fortune Global 500 companies, and government agencies worldwide. Our internal experts, together with our network of affiliated experts from academia, industry, and government, offer our clients exceptional breadth and depth of expertise.  To learn more about Analysis Group’s capabilities, visit