SPRINGFIELD, IL – In a “volatile” year for worldwide financial markets, the investment strategy employed by Teachers’ Retirement System protected member assets and limited the System’s portfolio loss in fiscal year 2022 to -1.17% net of fees, a favorable rate of return compared to other public pension systems across the country.
While a setback in the System’s progress toward long-term financial health, a negative investment return in a volatile economic year has not harmed the System.
Because TRS has relationships with members for several decades, the System focuses its attention on its long-term investment return rate. At the end of FY 2022, the 40-year rate of return was +9.3%, which bests the System’s estimated long-term investment rate of +7%.
TRS will continue to pay all benefits to our members in the future. This year, TRS will pay more than $7 billion in benefits on time and in full to more than 128,000 members and their families.
“Due to the under-funded status of TRS, the System’s primary objective is to protect member assets against large market drawdowns caused by economic volatility, such as we have seen this year,” said TRS Executive Director and Chief Investment Officer Stan Rupnik.
“TRS believes the most prudent strategy is a diversified portfolio that seeks to participate in the upside of the market but also is positioned to better protect assets in times of high market volatility,” he added.
TRS ended FY 2022 on June 30 with $62.7 billion in assets. The System reported $63.9 billion in assets at the end of FY 2021.
The TRS investment return in FY 2022 compared favorably to other measurements used in the financial industry:
- The median investment return rate for public pension plans comparable to TRS for the 12 months ended on June 30 was -7.56%, gross of fees, according to RVK, Inc., the System’s general investment consultant. The TRS rate of return gross of fees in FY 2022 was -0.56%.
- A study by the Wilshire Trust Comparison Service indicates that in FY 2022 the median return rate of large public pension plans was -7.25%.
- The Standard & Poor’s 500 Index reported a return rate for the year ended on June 30 of -10.6%.
The conservative investment strategy used by TRS is prudent due in part to a large long-term unfunded liability carried by the System. Currently, the funded status of TRS is 42.5%.
Instead of focusing its investments within a single asset class, such as public stocks, TRS commits assets to a variety of investment types. At the end of FY 2022, TRS had 32.6% of the portfolio invested in domestic and international stock markets, 24.3% in bonds and short-term assets, 19.7% in real estate and other tangible assets, 16.2% in private equity, and 7.2% in hedge funds and other diversifying strategies.
“Through June 30, 2022, and within an environment of economic instability, the TRS conservative strategy performed as intended,” Rupnik added. “As significant market volatility, rising inflation and interest rate increases hit in early calendar year 2022, the TRS portfolio performed very well.”
Here are the rates of return (net of fess) for TRS during the past 10 years and fiscal year end asset totals:
|Total Assets (in billions)|
About Teachers’ Retirement System
The Teachers’ Retirement System of the State of Illinois is the 42nd largest pension system in the United States, and provides retirement, disability and survivor benefits to teachers, administrators and other licensed public school personnel employed outside of Chicago. The System serves 434,000 members and had assets of $62.7 billion as of June 30, 2022.