Penn SERS Returns 3.3% in Q2 | Chief Investment Officer

The Pennsylvania State Employees’ Retirement System (Penn SERS) announced a 3.3% return for Q2 2017, which saw a 7.2% net-of-fees return on investments and provided almost $1.9 billion in earnings to the fund during H1 2017.

The fund earned 12% net-of-fees for the one-year period ended June 30, 2017.

Top asset classes were global public equity and private equity, earning a respective 4.8% and 4.5% for the quarter ended June 30. For the year, the classes earned 12% and 5.1%, respectively.

Real estate and hedge funds each returned 0.8% for the quarter, and 0.9% and 2.2%, respectively, for the year.

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Asset classes were rounded out by fixed-income and cash, with 1% and 0.6% respective returns for the quarter and 3% and 0.8% respective returns for the year.

According to a news release, all returns are reported net of fees. Private equity and real estate returns also lag by one quarter.

In addition, up to $700 million in new commitments to the private equity, multi-strategy, and real estate classes were approved by the board—with the investments being funded from cash subject to successful completion of contract negotiations.

As a follow-on investment to focus on middle-market buyout investments in North American high-growth companies, private equity was approved a commitment of up to $50 million to GTCR Fund XII L.P.

To focus on the purchase or origination of opportunistic credit, special situations, and distressed investments, up to $150 million to TSSP Adjacent Opportunities Partners, L.P. was approved by the board within the multi-strategy asset class. The approval also seeks to engage in direct lending across the credit cycle through adjacent and crossover opportunities within the TSSP platform.

In the real estate asset class, the board approved several commitments, which include:

Up to $50 million to SRE Opportunity Fund III, L.P., with up to an additional $50 million to a discretionary co-investment fund. The strategy will focus on opportunistic commercial real estate properties located in the US. This is a new relationship for Penn SERS.
Up to $100 million to C-III Recovery Fund III L.P., to invest in value-add commercial real estate properties located in the US. This is a new relationship for Penn SERS.

Up to $300 million to Blackstone Property Partners L.P., to invest in core-plus commercial real estate properties located in the US and Canada.

Within the fixed-income class, the board approved reallocating $200 million from cash to Mellon Capital Management US Aggregate Bond Index.

To establish a pool of transition managers Penn SERS can use for asset restructuring on an as-needed basis, the board will also retain Northern Trust contracting with Loop Capital Markets, Penserra, and Russell Investments.

The board also directed staff to conduct the following three studies:

One in partnership with the system’s general investment consultant, RVK, to result in a three-year plan to reduce total investment fees, for the board’s consideration later this year.
One in cooperation with Penn SERS and an independent expert consultant, to identify potential cost savings from operational and contracting consolidation with the school employees’ system, and present them to the board for consideration within the next six months.
One in partnership with the administrator of the commonwealth’s voluntary 457 Deferred Compensation Plan for state employees, Empower Retirement, to develop a plan to increase participation in the program among currently eligible employees and to identify the steps necessary to expand eligibility to municipal employees across the commonwealth for the board’s consideration within the next three months.

Tags: Pennsylvania Public School Employees Retirement System (PSERS), Pension, Q2

Less than half of Baby Boomers and members of Generation X have any retirement savings at all, while Millennials are more likely to be saving for retirement, with 68% contributing to workplace retirement plans, according to a new study conducted by the Insured Retirement Institute (IRI) on behalf of Jackson National Life Insurance Company.

The report said that studies on Baby Boomers and Generation Xers found that only about one in four consumers in each of those generations expect to receive income from a pension. Fewer than one in five consumers age 25-34 expect a pension to provide retirement income, and those under age 55 are the most likely to expect their savings to be a main source of retirement income.

“Americans of all generations, along with their advisors, are acutely aware they must save money now so they can generate income in retirement,” said the report. “Consumers and advisors agree today’s investors need to save now, save more, and create a plan for how they will use those savings to ensure they have adequate income during retirement and do not outlive their financial resources.”

The study found that as consumers get older and move closer to, or into, retirement, they seem to be more reluctant to look to their savings as a source of regular monthly income.

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“The dichotomy between consumers recognizing their need to use savings for retirement income and their growing reluctance to do so as they age may be explained both by a desire to preserve assets, and, for many, the lack of a clear strategy to convert a portion of their investable assets into guaranteed lifetime income—in other words, the lack of a comprehensive retirement plan, the report said.”

Across all age groups, the report found that more than half of consumers plan to dip into retirement savings by withdrawing money as needed to cover basic and discretionary spending, which it said carries a high risk of depleting assets, especially among those who live to an advanced age. Far fewer plan to transfer a portion of their savings to an annuity, or even set up a systematic withdrawal plan, the study found.

“Consumers ages 25-34 are the most interested in using an annuity-based approach,” said the report, “corresponding to this age group being both the most likely to say they plan to use their savings for income, and the least likely to say they expect to receive lifetime retirement income from a pension.”

Tags: Annuity, Insured Retirement Institute, Jackson National Life Insurance Company, Pension