US Equities Lead 9.8% PennSERS Return for 2024

U.S. equities buoyed the Pennsylvania State Employees’ Retirement System’s 9.82% return for 2024, raising its asset value to $37.8 billion, but falling six basis points shy of its benchmark, the fund . The $3.5 billion increase was maintained despite the pension ending the year with a slight fourth quarter loss.

Over the past 10 and 25 years, the pension fund has registered returns of 7% and 6.18%, respectively, trailing its benchmark’s returns of 7.68% and 6.7%, respectively, over the same time periods. Since the fund’s inception in 1981, the portfolio has had an annualized return of 9.27%.

For the year, PennSERS’ U.S. equities investments returned 23.4%, slightly less than the Russell 3000 Index and the S&P 1500 Index, which gained 23.8% and 24%, respectively. Legacy private credit funds were a distant second with a 10.50% gain but missed their benchmark by nine basis points. Emerging markets equities returned 8.64%, easily beating the benchmark return of 7.43%, while private equity earned 6.28%. Private equity’s benchmark returns were not available.

The fund’s cash investments returned 5.44% for the year, ahead of the three-month Treasury bill’s 5.25% return. International developed markets equities were up 4.97%, topping its benchmark by 82 basis points, while fixed-income investments were up 2.48%, nearly doubling the Bloomberg U.S. Aggregate Bond Index’s 1.25% gain. The pension’s Treasury inflation protected securities investments earned 1.81% for the fund, which barely missed its benchmark by three basis points.

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Real estate was PennSERS’ worst-performing asset class for the year, losing 12.25% and falling well short of its benchmark’s 8.44% loss.

Over the long term, private equity is the pension fund’s top-performing asset class, with 10- and 25- year annualized returns of 11.83% and 10.55%, respectively, followed by U.S. equities, which earned 11.79% and 7.57%, respectively, over the same periods. They are PennSERS’ top-performing asset classes since its inception with an 11.33% gain for private equity and an 11.06% return for U.S. equities.

As of the end of 2024, the PennSERS asset allocation was 37.35% U.S. equity, 18.11% fixed income, 17.38% private equity, 11.54% international developed markets equities, 5.74% real estate, 5.29% cash, 2.45% Treasury inflation protected securities, 1.1% emerging markets equities and 0.89% legacy private credit funds.