For the quarter ending September 30, 2025, the first quarter of the fiscal year, the FPIF investment portfolio returned 5.2% and policy benchmark returned 5.3%. For the calendar year to date, the FPIF investment portfolio returned 14.3%, slightly outperforming the policy benchmark of 14.1%. The one-year trailing return for the FPIF investment portfolio was 11.9%, outperforming the actuarial rate of return of 7.125% and the policy benchmark of 11.5%. All returns are net of fees.
With official economic data unavailable due to the government shutdown, Wall Street firms are using proprietary metrics to gauge U.S. performance, showing flat job growth in September, steady GDP expansion, and mixed inflation signals. While the Federal Reserve enacted a rate cut and may implement further easing, concerns persist that a prolonged shutdown, especially if federal job cuts materialize, could negatively impact economic momentum.
Fixed Income
Fixed income markets have performed strongly in 2025, supported by lower Treasury rates, a Fed rate cut, and robust corporate fundamentals, with the Bloomberg U.S. Aggregate Bond Index up 6.1% year-to-date. While fundamentals remain strong, rich valuations, tightening spreads, and macro uncertainties, including a government shutdown, geopolitical tensions, and a large U.S. deficit, pose potential risks to future returns.
U.S. Equity
U.S. equities surged during the quarter, led by small-cap stocks and AI-driven gains, as the Federal Reserve adopted a more accommodative stance. The broad U.S. equity market returned 8.2% for the quarter. However, speculative behavior and low-quality themes challenged active managers, while risks like inflation, high valuations, and geopolitical tensions could fuel future volatility.
International Equity
Non-U.S. equity markets delivered strong third-quarter gains as the broad non-U.S. equity market returned 6.9% for the quarter. These returns were driven by global tech momentum, central bank easing, and a weakening U.S. dollar, with emerging markets outperforming developed markets. While trade tensions have somewhat eased with the extension of a U.S.-China tariff truce, geopolitical risks and inflation uncertainty remain key areas of potential concern.
September 30, 2025 Investment Update
