A] Prelude
For more information on pension systems, risk and coverage, feel free to visit our dedicated webpages:
- https://expatpensionholland.nl/usa-expat-pensions
- https://expatpensionholland.nl/global-pillars-systems
- https://expatpensionholland.nl/global-investments-risks-0
- https://expatpensionholland.nl/global-social-security-coverage
For even more information about this topic feel free to visit the following external sites:
- https://www.dnb.nl/en/general-news/statistical-news/2026/dutch-pension-funds-invested-more-in-europe-in-2025-and-less-in-the-united-states/
- https://www.investopedia.com/articles/credit-loans-mortgages/090116/what-do-pension-funds-typically-invest.asp
B] The Issue
For many U.S. State Pensions that sought growth outside the U.S., that is paying off. Strong gains in non-U.S. and emerging market equities have helped propel several public plans like the Louisiana State Employees’ Retirement System and New York State Common Retirement Fund to double-digit returns for their 2026 fiscal years (18.4% and 11.9% respectively).
C] The Details
Louisiana State chief investment officer Bobby Beale attributed much of the $18.7 billion plan’s strong return to “broad strength in equities.” The plan’s 2025 report lists three active managers in charge of its emerging market holdings; China is the top exposure. Louisiana State allocates 20.1% to international stocks overall.
Meanwhile, New York State’s annual return was also boosted by its roughly 13% allocation to non-U.S. equities, which returned 24.41% for the fiscal year. The $295.4 billion state fund invested $1.4 billion in overseas equities earlier this year, allocating $700 million each to an emerging markets fund managed by RBC and the MFS International Growth Equity Fund.
Louisiana and New York aren’t the only state plans to see a boost from public international markets: Both of California’s state employee plans posted strong performance thanks to big gains in global stocks. The $637.1 billion California Public Employees’ Retirement System (CalPERS) returned a net 14.8% for the 12-month period ending June 30, while the $415.4 billion State Teachers’ Retirement System (CalSTRS), which is looking to expand further into emerging markets, returned a net 13.9% for its latest fiscal year. The state plans for Maryland and Rhode Island also saw their annual returns get a lift from international stocks.
D] Index Numbers
After years of U.S. stocks leading global equity markets, many institutional investors have increased their allocations overseas, drawn by more attractive valuations, concerns over U.S. policy uncertainty, and signs that the hegemony of American large-cap tech stocks may be fading. While the S&P 500 rose by nearly 18% over 2025, the MSCI World ex USA Index went up by nearly 32% last year, while the MSCI Emerging Markets Index saw a gain of almost 34%.
E] Finally
In an environment favoring value-oriented and cyclical exposures, many traditional quality growth managers are feeling the wind at their backs. According to NEPC’s head of marketable equity research Nedelina Petkova, strong performance from financials, industrials, and defense-related businesses and ongoing improvements in Japan have helped international developed markets.
Plus, Petkova wrote that EAFE (Europe, Australasia, and the Far East) performance “has been less dependent on a small number of technology companies and reflects a broader set of economic drivers than the U.S. market.”
Meanwhile, several market trends have shaped emerging market performance this year. Many active managers were hurt by the sharp underperformance of quality stocks. Portfolios that were overweight India and China and underweight Korea also lagged, as Korea outperformed both markets.
Beyond this year’s specific drivers, some investors see broader structural forces supporting international and emerging markets over the longer term. Rich Nuzum, head of OCIO at Franklin Templeton, explained over email that “while much has been written about trade tensions and some pundits continue to talk about deglobalization,” foreign direct investment flows across the international and emerging markets excluding the U.S. and China “generally continue to increase rapidly.” Nuzum added that “the rapid growth of wealth, and of a middle class of consumers, across emerging markets, is an additional tailwind.”
Finally as EPH we find it very interesting to see to what extent the markets will react when the U.S. administration will probably no longer have control of Congres after November and might even further change after two years.
(Sources: institutionalinvestor/EPH)