Asset AllocationAugust 26, 2024

Equities Fuel Kentucky Teachers’ Pension’s 12.3% Fiscal 2024 Gains

The TRS’ annuity trust’s asset value grew to nearly $26 billion despite missing its benchmark by more than 150 basis points.

Reported by Michael Katz

Kentucky’s Teachers’ Retirement System’s annuity trust investments returned 12.27% for the fiscal year ending June 30, raising its asset value to approximately $25.8 billion but missing its benchmark’s return of 13.80%.

The retirement system also reported three-, five- and 10-year annualized returns of 3.52%, 8.81% and 7.94%, respectively, below its benchmark’s returns of 4.94%, 9.15% and 8.09%, respectively, during the same periods.

According to the TRS and based on Aon Investments’ analysis of U.S. pension plans with more than $1 billion in assets, the annuity trust’s one-year return ranks among the top 10% of the plans; its three-year returns place it in the top 41%, while its five- and 10-year returns rank among the top 12% and 7% respectively.

“Another strong year in the markets resulted in great returns for retired teachers,” said TRS Executive Secretary Gary Harbin in a statement. “TRS’ disciplined investing, using the diversified approach established by the board of trustees and implemented by TRS’s investment team, continues to be beneficial in all markets.”

As of the end of June, the TRS’ asset allocation was 40.3% domestic equities, 19.9% international equities, 13.3% fixed income, 10.7% “additional categories,” 8.1% alternative investments, 6.6% real estate and 1.1% cash.

Domestic equities were the top-performing asset class for the TRS, returning 22.47%, compared with its benchmark’s 23.52% return. Within the equities portfolio, large-cap stocks provided the highest returns, increasing 24.65%, just ahead of the 24.56% return for its benchmark.

International equities earned 8.62% for the TRS, well below the benchmark’s return of 12.17%, while fixed-income investments returned 3.53%, outperforming its benchmark’s 2.74% return by nearly 80 basis points. The fund’s private equity investments gained 7.76%. No benchmark for private equity investments was available. Real estate was the worst-performing asset class for the TRS, losing 5.11% for the fiscal year, as it was weighed down by its core real estate investments, which lost 9.41%.