CT Pension Funds Post 14% Return, $8.3B Gain in 2025

Connecticut’s pension fund posted a 14% return on investments last year, generating roughly $8.3 billion in gains for retirement programs covering state employees, teachers and municipal workers, State Treasurer Erick Russell announced this week.

The results cleared the state’s target annual return of 6.9% by a wide margin. Connecticut manages nearly $69 billion in pension assets, and among public pension funds holding more than $10 billion in assets, the state’s 2025 performance ranked in the top 17% of peer funds nationwide, Russell said.

The strong year follows back-to-back gains that Russell also cited: a 10.3% return for calendar year 2024 and 12.8% for 2023. Together, the three-year run marks a significant turnaround for a fund that struggled for years to keep pace with comparable programs across the country.

Russell credited more than a favorable stock market. The Dow Jones Industrial Average grew more than 13% in 2025, and the S&P 500 topped 16%, giving pension fund managers broadly favorable conditions to work with. But Russell said Connecticut’s results reflect deliberate portfolio decisions his office has been making.

“Markets certainly have been strong, but a lot of this is about our overall asset allocation,” Russell said. “The progress we’ve been making is a good sign that we’re set up for future success.”

His office has shifted more funds into private and domestic markets and reduced reliance on outside investment managers who charge large fees. Those moves have lowered costs and improved net returns over time.

The gains come against a backdrop of serious long-term challenges. A May 2023 report from Yale University researchers found that Connecticut’s investment results had badly lagged national peers over the prior decade. That finding added urgency to reforms already underway since the early 2010s, when state officials began confronting a pension shortfall that had been building for generations.

According to the Center for Retirement Research at Boston College, Connecticut governors and legislatures failed to set aside adequate funds for pension benefits for more than seven decades before 2011. That decades-long underfunding starved the treasurer’s office of assets that could have compounded into billions in additional revenue.

Gov. Ned Lamont and the General Assembly have worked to close that gap from another direction: direct payments. Since 2020, the state has used $10 billion from budget surpluses to make supplemental pension contributions for state employees and municipal teachers, on top of annual required payments that now approach $3.3 billion in the General Fund.

Lamont’s budget spokesman, Chris Collibee, pointed to the investment gains as a product of that combined approach. “These returns highlight the impressive work of Treasurer Russell and his team in increasing investment returns,” Collibee said. “Gov. Lamont’s focus has been on building a sustainable Connecticut for the future. Every dollar in additional investment revenue is funds the state can use to cut taxes and provide more services.”

Russell, who this week also announced he will seek a second term as treasurer, updated the state’s Investment Advisory Council Wednesday on the portfolio’s performance.

The pension fund’s improved trajectory matters beyond accounting. For a state that carries one of the highest per-capita pension debt burdens in the country, strong investment returns directly affect how much Connecticut needs to pull from its general budget each year to meet retirement obligations. Every percentage point above the target return means less pressure on state finances and, in theory, more flexibility for other spending priorities or tax relief.

Whether the recent run of strong returns continues is far from guaranteed. Market volatility in early 2026 has rattled investors, and the conditions that drove equity gains last year look less certain heading into spring. Russell’s office has emphasized that its asset allocation strategy is designed to produce steady results across different market environments, not just in favorable ones.

For now, the numbers give state officials something they have not had in a long time: a track record they can point to.