PSRS/PEERS Achieves Record High Investment Results; Ready for Market Challenges Ahead

Investment Returns are 21.8% for fiscal year 2011

The Public School Retirement System of Missouri (PSRS) and the Public Education Employee Retirement System of Missouri (PEERS) achieved record high investment returns in fiscal year 2011. The Retirement Systems earned returns of 21.8% and 21.4%, respectively, for the fiscal year July 1, 2010 through June 30, 2011 – the highest fiscal-year returns for both Systems in over 20 years.

These earnings resulted in an increase in PSRS/PEERS’ assets of more than $5 billion over the previous year, due largely to strong gains in publicly traded stocks. “We are pleased that the returns exceeded both the plans’ investment return benchmark of 20.4%, and the 8.0% actuarially assumed rate of return,” said Craig Husting, PSRS/PEERS Chief Investment Officer.  He added, “It is also important to note that these strong returns were achieved while once again taking less investment risk than a large majority of other public pension funds in the nation.”

Within the PSRS/PEERS investment portfolio, U.S. stocks delivered a return of 35.0%, global stocks returned 29.8%, private equity (investments in private companies) and private real estate each increased over 20.3%, and hedged assets produced a return of 18.8%.

PSRS/PEERS total assets were approximately $29.6 billion on August 31, 2011, making the combined entity larger than all other public retirement plans in Missouri combined, and the 42nd largest defined benefit plan in the United States.

A Proven Investment Strategy

As the economy and the investment markets become more difficult, the focus will continue to be on the implementation and management of a portfolio that can benefit from market strength but also offer protection during market weakness.

Since the end of the fiscal year (June 30, 2011), the public stock markets have been under significant pressure as risk, volatility and uncertainty have increased across the global investment landscape. Specifically, European sovereign debt concerns have heightened, there are mounting fiscal issues in the United States and the global economy is slowing.

The PSRS/PEERS Board of Trustees and staff continue to embrace an investment philosophy centered on a disciplined and diversified investment approach.  This philosophy has been implemented over the past few years by the internal investment staff, as the portfolio has expanded into multiple asset classes outside of stocks and bonds. This diversification can provide more stable investment returns, even during a stock market downturn.

The Systems also continue to have a large investment allocation (over $5 billion) in the safest and most liquid asset in the world, U.S. Treasury securities.  These securities provide solid returns in a period of crisis (acting as a diversifier to public stocks) and also ensure the liquidity needed to pay retirement benefits.

“PSRS/PEERS is a long-term investor,” said Husting. “We manage assets with closely monitored levels of risk, in a diversified portfolio structured to withstand short-term shocks to the markets, yet positioned to provide consistent asset growth over time.”  He added, “Our long-term strategy will help deliver more stable returns during difficult market conditions.”

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