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59

City of Raleigh

Financial Section

The target allocation and best estimates of arithmetic real rates of return for each major asset class as of June 30, 

2015 are summarized in the following table: 

Asset Class

Fixed Income 

29.0%

2.2%

Global equity 

42.0%

5.8%

Real estate

8.0%

5.2%

Alternatives

8.0%

9.8%

Credit

7.0%

6.8%

Inflation protection 

6.0%

3.4%

100.0%

Target 

Allocation 

Long‐Term 

Expected Real Rate 

The information above is based on 30 year expectations developed with the consulting actuary for the 2014 asset 

liability and investment policy study for the North Carolina Retirement Systems, including LGERS.  The long‐term 

nominal rates of return underlying the real rates of return are arithmetic annualized figures.  The real rates of 

return are calculated from nominal rates by multiplicatively subtracting a long‐term inflation assumption of 3.00%.  

All rates of return and inflation are annualized. 

Discount Rate.

  The discount rate used to measure the total pension liability was 7.25%.  The projection of cash 

flows used to determine the discount rate assumed that contributions from plan members will be made at the 

current contribution rate and that contributions from employers will be made at statutorily required rates, 

actuarially determined.  Based on these assumptions, the pension plan’s fiduciary net position was projected to be 

available to make all projected future benefit payments of the current plan members.  Therefore, the long‐term 

expected rate of return on pension plan investments was applied to all periods of projected benefit payments to 

determine the total pension liability. 

Sensitivity of the City’s Proportionate Share of the Net Pension Asset to Changes in the Discount Rate

.  

The 

following presents the City’s proportionate share of the net pension asset calculated using the discount rate of 7.25 

percent, as well as what the City’s proportionate share of the net pension asset or net pension liability would be if 

it were calculated using a discount rate that is one percentage point lower (6.25 percent) or one percentage point 

higher (8.25 percent) than the current rate: 

1 % Decrease

Discount Rate

Discount Rate

(6.25%)

(7.25%)

(8.25%)

Cityʹs proportionate share of the net 

pension liability (asset)

117,557,285

$      

16,858,632

$        

(67,977,834)

$       

Pension Plan Fiduciary Net Position.

 Detailed information about the pension plan’s fiduciary net position is 

available in the separately issued Comprehensive Annual Financial Report (CAFR) for the State of North Carolina. 

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