The Pennsylvania Public School Employees’ Retirement System, despite global economic and political volatility, posted a net investment return rate of 6.68 percent for the recently completed fiscal year.
The 2018-19 net investment return data (July 1, 2018 - June 30, 2019) was released Friday at a special public meeting of the PSERS Board of Trustees.
PSERS Chief Investment Officer James H. Grossman Jr. attributed the positive one-year return and the 10-year return rate of 9.02 percent to PSERS’ diversified asset portfolio, which totals about $57.7 billion. Performance this past year was driven by strong, net of fee results from our private equity, gold, long treasury and risk parity investments, he said. By spreading out investments among more than a dozen asset classes, Grossman added, PSERS can better withstand the market uncertainty caused by ongoing trade issues between the United States and China, an upcoming U.S. presidential election, the low interest rate climate, the United Kingdom’s political debate to leave the European Union, and signs of economic slowdowns elsewhere in the world.
“Our first job as fiduciaries is to protect members’ pension benefits, and we do that in large part by diversifying our asset portfolio,” Grossman said later. “That, sometimes, means PSERS earns a little less in any given year from being less exposed to more volatile equity markets. Reducing equities and diversifying into other assets allows us to better withstand the constant, extreme seesaw effects we have been seeing in the markets.”
PSERS’ pension benefits are funded through employee and employer contributions, and investment earnings on those contributions. Over the last two decades, investments have made up 56 percent of the system’s funding.
PSERS aims for a long-term investment assumption goal of 7.25 percent.
Since the fiscal year 2018-19 investment return is close to the actuarial expected return, little to no adverse impact is expected on PSERS’ projected employer contribution rate for fiscal year 2020-21 from investment performance, said PSERS Executive Director Glen Grell.
“There’s no sure thing when it comes to investing and posting a 6.68 percent return is no small feat, especially in today’s economic climate,” Grell said. “Our members should rest assured that every investment and executive decision we make is done through our fiduciary lens of protecting their hard-earned retirement income.”
PSERS’ long-term net investment performance summary for the periods ended June 30, 2019 includes:
- 1 Year: 6.68%
- 3 Years: 8.71%
- 5 Years: 6.04%
- 10 Years: 9.02%
- 25 Years: 8.08%
- 30 Years: 8.25%
More details about PSERS’ investment performance and records can be found on the Investment Program link on PSERS’ website: https://www.psers.pa.gov/Pages/default.aspx
PSERS was founded in 1917 to oversee a statewide defined benefit pension plan for public school employees. PSERS’ role expanded in 2019 to include oversight of a new defined contribution plan. PSERS membership covers about 256,000 active and 233,000 retired school employees.