Updated: March 1, 2019
Issue: Teachers’ Retirement System investments generated a positive 9.2 percent rate of return, gross of fees, (8.5 percent net of fees) during fiscal year 2018. The investment return in FY 2017 gross net of fees was 13.3 percent and 12.6 percent net of fees.
TRS ended FY 2018 on June 30 with $51.7 billion in assets, which places the System among the top 40 largest pension funds in the United States.
Discussion: The rate of return for FY 2018 validates the investment strategy of the TRS Board of Trustees to maintain a widely diversified portfolio, which combats volatility in the world financial markets. By diversifying the System’s assets across a wide range of investment opportunities, any losses in one particular investment class are balanced by gains in other sectors. The goal is to achieve steady growth over the long-term.
At the end of FY 2018, TRS maintained approximately 35.9 percent of its investments in publicly-held companies around the world, approximately 23 percent in bonds and other fixed-income securities, approximately 14 percent in real estate worldwide, approximately 13.2 percent in private equity opportunities and the remainder in various alternative investments, including hedge funds and commodities.
The TRS investment strategy does not focus on a single year’s worth of investment returns and will always take a long-term view of investment returns because the System is a perpetual entity that must be in place for retired members and active members for decades to come. During the 30-year period that ended in 2018, TRS investments earned 8.3 percent net of fees against a long-term target of 7 percent.
The 8.5 percent rate of return net of fees for FY 2018 edged out the System’s 8.19 percent custom benchmark for the fiscal year. Since 2000, TRS has recorded positive investment returns in 14 fiscal years.