Illinois TRS Earns 12.6% in FY2017

The Teachers’ Retirement System (TRS) of the State of Illinois has reported a 12.6% rate of return, net of fees, for the fiscal year ended June 30, exceeding the system’s investment benchmark of 11.4%.

The return brought the TRS’s asset total to $49.4 billion. Gross of fees, the TRS return for Fiscal Year 2017 was 13.3%, while the total investment income, net of fees, was $5.5 billion. The 30-year investment return for TRS currently is 8.1%, net of fees, which exceeds the system’s long-term investment goal of 7%.

Within the overall investment portfolio, the equity portfolio performed the best, recording a 19.8% return, net of fees, Dave Urbanek, TRS’ director of communications told CIO. The equity portfolio consists of domestic equity, which returned 20%; international equity, which returned 22%; and private equity, which returned 17.4%.

Although TRS’ funded status improved slightly during the year to 40.2% from 39.8%, the unfunded liability increased to $73.4 billion, from $71.4 billion at the end of Fiscal Year 2016.

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Urbanek said the funded status improved because of the portfolio’s investments had a good year, but attributed the increase in the unfunded liability to the state of Illinois not giving TRS its full funding contribution.

“For both FY 2018 and the upcoming FY 2019, the state contribution is or will be $2.9 billion short of a ‘full funding’ amount,” said Urbanek. He also pointed out that the increase in the funded status from fiscal year 2016 to 2017 was very small, which means the total investment income of $5.5 billion in 2017 more than cancelled out the dollar amount increase in the unfunded liability.

“Nonetheless,” said Urbanek, “it means we’re treading water financially and still only have $0.40 for every dollar we should have in assets to pay off the system’s long-term obligations.”

The system’s three-, five-, and 10-year returns were 6.1%, 9.9%, and 5.4%, respectively, compared to its benchmark, which returned 6.1%, 9.3%, and 5.3% over the past three, five, and 10 years, respectively.

TRS Executive Director Dick Ingram in a statement that the net-of-fees 30-year rate-of-return of 8.1% is the most important number in the system’s fiscal year 2017 investment data. TRS’ investments have earned positive returns in eight of the past 10 years, with the two years of negative returns realized during the worldwide financial crisis of 2008 and 2009.

The TRS is the 27^th-largest public pension system in the US, and serves 412,500 members.

Tags: Fiscal Year, Illinois Teachers’ Retirement System, Pension

The Government Pension Fund Global returned 3.2%, or NOK192 billion ($23.53 billion), in the third quarter of 2017, edging out its benchmark by 0.1%.

The fund’s equity investments returned 4.3%, unlisted real estate returned 2.7%, and fixed-income returned 0.8%. The fund had a market value of NOK7.952 trillion kroner ($970 billion) at the end of the quarter, and was invested 65.9% in equities, 31.6% in fixed income, and 2.5% in unlisted real estate.

Oil and gas companies delivered the best return in the third quarter at 8.7%, due to higher oil prices in the wake of increased demand for oil, a normalization of global oil stocks, OPEC’s quota discipline, and lower production of shale oil in the US. Basic materials returned 8.4%, which was driven by higher prices for metals and chemicals on increased demand and supply problems.

North American stocks returned 3.4% for the quarter, and made up 38.2% of the equity portfolio. US stocks, which were the fund’s single-largest market with 35.9% of its equity investments, returned 3.2%, or 4.6% in local currency, while European stocks returned 5.5% and accounted for 37% of the fund’s equities. The UK, which was the fund’s largest European market with 9.7% of its equity investments, returned 4.9%, or 2.9% in local currency.

Stocks in Asia and Oceania, which accounted for 21.8% of the fund’s equity investments, returned 3.7%. Among those, Japanese stocks returned 3.7%, or 5.3% in local currency, and made up 8.9% of equity investments, while China’s stock market, which makes up 3.2% of the fund’s equity investments, returned 10.4%. Emerging markets returned 6.4% and accounted for 10.2% of the equity portfolio.

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Technology stocks returned 6.5%, with long-term trends continuing to fuel expectations for future earnings and returns in the sector, the fund said. Semiconductor manufacturers in particular contributed to the return, boosted by strong demand and limited supply. Meanwhile, consumer services stocks were the worst-performing stocks, returning 1.1%. Media companies made a negative contribution as a result of declining ad revenue, and traditional TVs struggle to compete with new alternatives.

Among individual stocks, the fund’s investment in oil company Royal Dutch Shell made the most positive contribution to its third-quarter return, followed by technology companies Tencent, and Apple. The fund’s worst-performing stocks were consumer goods company Nestlé SA, health care company Teva Pharmaceutical Industries, and industrial company General Electric.

Tags: Government Pension Fund Global, Norway, Pension, Q3

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