HARRISBURG – The Pennsylvania Public School Employees’ Retirement System earned nearly 13 percent in net-of-fees investment returns for the 2019 calendar year, according to information released at a public meeting Thursday.
PSERS’ 12.92% return covered the calendar year ended Dec. 31, 2019. The return added $6.8 billion in net investment income to the Fund. That return pushed the Fund’s total net asset value to $60.5 billion, the highest month-end close since September 2008.
Investment performance was driven by U.S. equities (up 31.2%); non-U.S. equities (up 27.3%); risk parity (up 20.6%); infrastructure (up 17.0%); gold (up 16.9%); and U.S. Treasuries (up 13.3%), Chief Investment Officer Jim Grossman reported at a meeting of the PSERS Board of Trustees Investment Committee.
The calendar-year return tracked above PSERS’ long-term investment assumption goal of 7.25%. However, PSERS operates on a fiscal-year basis (July 1, 2019 to June 30, 2020). Investment return earnings and the Fund’s total net asset value will change before the fiscal year closes.
PSERS’ asset portfolio is structured to have a more balanced array of investments spread over multiple asset classes and geographies. The portfolio seeks to maximize returns while being less reliant on equities and the risks they pose in economic downturns. About 30 percent of the portfolio is in public and private equities while the rest is spread among fixed income, real estate, commodities, absolute return, risk parity, infrastructure and cash.
“PSERS’ more balanced investing practices helped the Fund retain a positive return when equity markets tumbled in the 2018 calendar year,” Grossman said. “With that history as a guide, he added, PSERS’ portfolio should better withstand the coronavirus fears that have whipsawed markets, curtailed travel, tamped down economic growth projections, and caused the Federal Reserve to lower interest rates.”
At the meeting, the Investment Committee considered three private markets investments : up to $175 million for New Mountain Partners VI; up to $100 million in Hg Saturn 2 A L.P.; and up to €100 million in Hg Genesis 9 A L.P.
The full Board of Trustees is scheduled to vote on those investments when it convenes its public meeting on Friday.
PSERS’ net-of-fee returns for the period ending Dec. 31, 2019, were: 4.14% for fiscal-year-to-date; 8.40% for three years; 6.83% for five years; 8.11% for 10 years; and 8.17% for 25 and 30 years.
About the Pennsylvania Public School Employees' Retirement System
PSERS, founded in 1917, began operations in 1919 to oversee a statewide defined benefit pension plan for public school employees. PSERS' role expanded upon the passage of Act 5 of 2017 to include oversight of two new hybrid options consisting of defined benefit and defined contribution (DC) components and a stand-alone DC plan. As of December 31, 2019, PSERS had net assets of approximately $60.5 billion and a membership of about 256,000 active and 237,000 retired school employees.