August 2022 Board of Trustees Meeting Summary

The Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS) Board of Trustees convened on August 28 and 29, 2022. In attendance were Board members Jason Steliga, Dr. Kyle Collins, Sharon Kissinger, Dr. Melinda Moss, Beth Knes, Dr. Eric Park and Allie Gassmann. Also present were Executive Director Dearld Snider; Assistant Executive Director, Operations Bill Betts; Assistant Executive Director, Investments Craig Husting; General Counsel Sarah Swoboda; Chief Financial Officer Anita Brand; Chief Technology Officer Lisa Scheulen; Director of Member Services Nicole Hamler; Director of Employer Services Stacie Verslues; Director of Communications Susan Wood; Director of Internal Audit, Jeff Hyman; Director of Legislation and Policy Mike Moorefield; Director of Executive and Board Administration Jennifer Martin; and various other PSRS/PEERS staff members.

Actuary 101 - Sunday, August 28, 2022

Mr. Brandon Robertson and Ms. Cindy Fraterrigo with PricewaterhouseCoopers, LLP (PwC) provided the Board and staff with an overview of the actuarial process for retirement plans. Mr. Robertson and Ms. Fratterigo reviewed the services typically provided by actuaries, specifically the purpose, process and calculation methods for actuarial valuations. They also discussed the cost impact of different retirement plan features and provided an update on recent developments within the industry.

Regular Board Meeting - Monday, August 29 2022

System Operations

Minutes

The open session minutes from the June 5 and 6, 2022 Board Meeting and July 10-13, 2022 Investment Symposium were approved by unanimous vote.

Order of Business

None

Appointment of Budget and Audit Committee Members

The retirement of Dr. Moss created a vacancy on the Budget and Audit Committee. Chairman Jason Steliga and Ms. Beth Knes currently serve as the other two Budget and Audit Committee Members. Chairman Steliga nominated Dr. Kyle Collins for the position and this nomination was approved by unanimous vote.

Other

Chairman Steliga welcomed our newest board member, Allie Gassmann to her first official Board meeting.  Executive Director Dearld Snider presented a plaque to Dr. Melinda Moss for her dedication and service as a PSRS/PEERS Trustee. Ms. Moss is retiring as superintendent of Joplin Schools effective October 1, 2022. Chairman Steliga presented Dr. Moss with flowers and thanked her for her service. 

Chairman Steliga recognized PSRS/PEERS Portfolio Manager Mr. Ben Frede. Institutional Investor announced its 2022 Ten Rising Stars this week and Mr. Frede was on the list. Institutional Investor’s editorial team chose the Rising Stars from a pool of talented allocators nominated by their peers, bosses and industry experts. Each Rising Star will be honored during Institutional Investor’s fifth annual Allocators’ Choice Awards on September 13 in New York.   

Investment Report

Fiscal Year 2022 Performance and Attribution

Mr. Craig Husting from PSRS/PEERS and Mr. Michael Hall from Russell (the Systems’ Investment Consultant) provided a detailed presentation on the PSRS/PEERS fiscal year 2022 investment performance. The presentation included the following: (1) a review of the Systems’ investment principles, philosophy and asset allocation, (2) a summary of fiscal year 2022 performance, (3) a review of the private markets activity, (4) PSRS/PEERS’ performance relative to expectations and relative to a peer group, (5) attribution for fiscal year 2022 performance and (6) an update on fiscal year 2023.

Mr. Husting reported that the fiscal year 2022 (July 1, 2021 through June 30, 2022) investment return for PSRS/PEERS was approximately -2.85%, or, -3.06% net of all fees and expenses. The Systems outperformed the passive benchmark which returned -10.25% for the year. 

Mr. Husting reported that the five-year annualized return for the Systems for the period ending June 30, 2022 was 8.63%, or, 8.44% net of all fees and expenses. The Systems outperformed the passive benchmark which returned 5.94% for the five-year period. The five-year PSRS and PEERS investment returns exceeded 80% of the peer group as defined by the Wilshire TUCS universe of public pension plans with assets in excess of $1 billion. The Systems generated the investment return while taking less risk than approximately two-thirds of comparable public funds. The PSRS/PEERS internal investment staff and external investment managers added value above the policy benchmark of over $6.0 billion, net of all fees and expenses, for the last five years. The outperformance was due to portfolio construction and tactical asset allocation decisions by internal investment staff (overweighting and underweighting asset classes around targets) as well as active management on the part of external managers.

NISA-Inflation Outlook

Mr. Stephen Douglass from NISA Investment Advisors provided an inflation update. Mr. Douglass discussed the inputs that have impacted the high inflation reading over the last year, Federal Reserve activity and expectations for inflation over the next year and for the long-term.

Management Report

Appointment of NCTR Delegates

Dr. Kyle Collins, Jason Steliga and Mr. Dearld Snider were approved as delegates and Ms. Jennifer Martin was approved as an alternate by a unanimous vote to serve at the annual National Council on Teacher Retirement (NCTR) Conference being held October 11, 2022 at 2:15 p.m. in Tucson, AZ. 

Member Services Report

Ms. Nicole Hamler from PSRS/PEERS reviewed Member Services statistics for the 2021-2022 fiscal year and discussed the department’s many accomplishments during that time. She also commended her team for continuing to provide a high level of customer service. Ms. Hamler presented to the Board information regarding total membership statistics, active service information, benefits, working after retirement and total member interactions.

CEM Benchmarking

PSRS/PEERS participated in the CEM benchmarking study based on fiscal year 2021 performance. Mr. Bill Betts and Ms. Jenny Patterson from PSRS/PEERS and Mr. Franco Wang (virtual attendance) with CEM Benchmarking Inc. presented a summary of the final report. CEM benchmarked PSRS/PEERS' service and costs compared to 72 leading global pension systems, including 11 in our peer group that are similar in size.
For the fifth straight year, the results were very positive, with an overall service score of 89 out of 100. This high level of service was provided in a cost-efficient manner with total administration costs below the average cost of the CEM universe.

Mr. Wang explained to the Board how CEM measures both costs and service by analyzing over 120 key performance metrics. Mr. Betts expressed his appreciation to CEM, but more importantly, to the staff of PSRS/PEERS for continuing to provide a high level of service in a cost-efficient manner.

CPI-U and COLA Update

Mr. Dearld Snider reviewed the COLA policy that was set by the Board at their November 3, 2017 meeting. According to the policy, COLAs may be granted based on the Consumer Price Index for Urban Consumers (CPI-U) as follows:

Mr. Snider explained that the CPI-U is calculated by the Bureau of Labor Statistics (BLS). The CPI-U is the measure of the change in prices of goods and services purchased by urban consumers between any two time periods. PSRS/PEERS’ regulations require that the time period for the CPI-U calculation used in the determination of a COLA be from June to June. Based on the values provided by the BLS, the CPI-U is up 9.0598% through June 30, 2022.

The CPI-U calculation for Fiscal Year 2022-2023 is:

The beginning CPI-U for 2022-2023 is at -0.0118% through July 31, 2022. The August CPI-U update will not be released until September 13, 2022.

GFOA Award

Mr. Dearld Snider from PSRS/PEERS shared with the Board that the Systems were awarded the Government Finance Officers Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting for the Systems’ fiscal year 2020 Annual Comprehensive Financial Report. The Systems have received the GFOA Certificate of Achievement each year since 1994. Mr. Snider explained to the Board that the annual report is a collaborative effort among departments and also reminded the Board of the importance of the annual report, as it is an record of all activity conducted by the Systems during the fiscal year.

Public Comment

None

Other

None

Closed Session

The Board voted to go into closed session at 12:32 p.m.

Systems Update/Legislative Review and Planning Meeting

The Board voted to go back into open session at 1:30 p.m. Following a break, they started the Systems’ Update/Legislative Review and Planning Meeting at 1:45 p.m. 

Mr. Dearld Snider provided a recap of changes and enhancements made to the Systems since their inception, ultimately making them the plans they are today. He also noted the two major areas of financial impact on the Systems over the past year – inflation and investment markets. Mr. Craig Husting discussed fiscal year 2022 investment markets and the fact that it was a historically bad year for traditional asset classes. He reviewed PSRS/PEERS’ investment returns over the long-term and concluded by discussing PSRS/PEERS’ investment philosophy. 

Mr. Snider discussed inflation and associated costs to the Systems when providing cost-of-living adjustments (COLAs). Ms. Cindy Fraterrigo and Mr. Brandon Robertson from PricewaterhouseCoopers (PwC) further reviewed the impact of inflation and the investment markets in relation to the Systems’ Actuarial Accrued Liability (AAL), actuarial assumptions and funding.

Mr. Mike Moorefield from PSRS/PEERS reviewed current government contracting mandates and any PSRS/PEERS policies associated with these types of mandates. Mr. Moorefield then opened up the discussion to the various education associations in attendance to discuss their individual legislative platforms for the legislative session beginning in January.

Adjournment

The Board adjourned at 3:08 p.m.

This summary is not official minutes of the PSRS/PEERS Board of Trustees meeting. The official minutes will be approved at the next PSRS/PEERS Board of Trustees meeting and will posted to our website at that time.