HARRISBURG – The Pennsylvania Public School Employees’ Retirement System (PSERS) had a preliminary net investment return of nearly 12% for the first half of the Commonwealth’s 2020-21 fiscal year, according to information presented to the Board of Trustees during public meetings this week.
The System’s estimated 11.84% net return covered July 1, 2020, to Dec. 31, 2020, the close of the fiscal year’s second quarter. That draft return is 4.6 percentage points higher than the System’s 7.25% assumed rate of return and generated net investment income of $5.8 billion.
The estimated overall fund performance was driven by positive returns in global public equity and private equity, PSERS Chief Investment Officer Jim Grossman said during the Board's Investment Committee meeting on Thursday. Many asset classes, he added, are affected by congressionally approved fiscal policy and separate monetary policies enacted by the Federal Reserve and other international central banks to combat the pandemic’s lingering economic effects. At the same time, people’s COVID-19 related living, working and shopping habits are continuing to negatively impact other aspects of the economy, Grossman said.
“These returns are a snapshot in time for a long-term investor like PSERS,” Grossman said after the meeting. “The equity markets have significantly recovered since the pandemic lows in March 2020. Still, we will continue to do our best to prudently manage the fund’s assets and risk profile through the ebb and flow of these everchanging markets.”
Final return results for the second quarter will not be complete for a few more weeks. The next financial quarter closes on March 31, 2021, and the fiscal year ends June 30, 2021.
On Friday, the Board approved a $200 million commitment to a private markets real estate fund, Carlyle Realty Partners IX, L.P. and a $175 million commitment to a private equity fund, Apax Digital II L.P. Both approvals are contingent on PSERS Chief Counsel Office approving contracts with the funds.
Also, on Friday, the Board approved a resolution associated with the Experience Review of PSERS membership demographic assumptions for the five years ended June 30, 2020. The ongoing review was completed by Buck, PSERS actuary. The Board resolution adopted changes to certain demographic assumptions, including retirement option and withdrawal selections. The Board will be reviewing the results of the Experience Review’s economic and mortality assumptions at the June 2021 meeting. All assumption changes then will be implemented in the June 30, 2021, actuarial valuation, which is used to set future employer contribution rates.
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 Dec. 31, 2020, PSERS had net assets of $64.2 billion and a membership of about 256,000 active, 240,000 retired school employees and 26,000 vested inactive members.