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TRS Sets Preliminary FY22 State Contribution at $5.7 Billion, Net FY20 Investment Return was 0.6%

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SPRINGFIELD, IL – The Teachers’ Retirement System Board of Trustees has given preliminary approval to a $5.69 billion state contribution to the System for fiscal year 2022, a 10.7 percent increase over the current fiscal year’s government contribution of $5.14 billion.

The Board also announced that due to the economic upheaval created by the COVID-19 pandemic, the final TRS investment return for FY 2020 was +0.55 percent, net of fees, on June 30. By comparison, on December 31, 2019, the half-way mark in FY 2020, the TRS rate of return was +13.41 percent.

“TRS has enough money on hand to pay all pensions for years into the future,” said TRS Acting Executive Director Stan Rupnik. “Yet, the System still carries a large long-term unfunded liability that leaves TRS vulnerable in an era of economic uncertainty caused by the coronavirus.”

The System’s unfunded liability increased by $2.6 billion during FY 2020 to a total of $80.7 billion. The total liability – all benefits owed to all TRS members for all time – increased by $4.1 billion to $135.6 billion.

Despite the growth of the unfunded liability in FY 2020, the funded status of TRS remained relatively stable at 40.5 percent; compared to 40.6 percent in FY 2019 and 40.7 percent in FY 2018.

The TRS Board is required each year to certify the state’s annual contribution to the System for the next fiscal year. That preliminary contribution is then reviewed by the State Actuary before it is included in the state budget for the upcoming year.

TRS ended fiscal year 2020 on June 30 with $51.6 billion in assets. Due to the coronavirus effect, that total is 3.4 percent lower than the $53.4 billion in total assets recorded in FY 2019. At the half-way point of FY 2020 in January, the System had $54.2 billion in assets. The pandemic caused total assets to drop to $48.5 billion at the end of March. During the final quarter of the fiscal year, TRS recouped $3.1 billion that had been lost due to the virus.

“Everyone took a hit during the early months of the pandemic,” Rupnik said. “But the investment strategies we have in place limited losses and have allowed us to prudently rebuild the portfolio’s value.”

During the January-March quarter of FY 2020, the TRS investment return was -9.95 percent, net of fees. During the previous quarter, October to December, the System’s return was +4.28 percent. The System’s return during the April to June quarter was +6.84 percent.

The TRS return between January and March, however, stood favorably compared to other economic measurements of the same period, including negative investment returns for various stock market measurements. The Standard & Poor’s 500 index, for instance, returned -19.6 percent during the January – March quarter.

Long-term, TRS investment returns continue to exceed the System’s long-term assumed return rate of +7 percent. For FY 2020, the 40-year TRS return was +9.0 percent.

“The long-term investment returns are the most important numbers for our members,” Rupnik said. “These timeframes reflect the long-term relationship that TRS has with its members, both as active educators and as retirees. The long-term returns also indicate a successful investment program that values steady growth and strong risk management over several generations.”

TRS investments have recorded positive returns throughout the decade following the 2008-2009 worldwide financial crisis. All returns in this chart are net of fees:

Fiscal Year TRS Return
2020 + 0.6
2019  + 5.2%
2018  + 8.5%
2017 + 12.6%
2016 + 0.01%
2015 + 4.0%
2014 + 17.4%
2013 + 12.8%
2012 + 0.8%
2011 + 23.6%
2010 + 12.8%

During the Board of Trustees’ regularly scheduled October meeting, the following actions were taken:

  • The Board hired Korn Ferry, of Los Angeles, California, to assist the System and lead a nationwide search for a new executive director. Former Executive Director Richard W. Ingram resigned in July.
  • The Board hired The Segal Group, of New York, New York, to conduct a high-level review, assessment and oversight of the System’s second-generation pension administration system, which is known as the “Gemini Project.”

Staff also reported the following activity within the TRS investment portfolio:

  • Within the $14.4 billion Global Income Portfolio:
    • The commitment of $100 million to Oaktree Capital Management of Los Angeles, California. Oaktree currently administers $327.2 million in TRS assets.
  • Within the System’s $6.5 billion Private Equity Portfolio:
    • The commitment of up to $100 million to Clearlake Capital Group, of Santa Monica, California. Clearlake currently administers $411.9 million in TRS assets.
    • The commitment of $175 million to two funds managed by RCP Advisors, of Chicago: $125 million to RCP SBO Fund II and $50 million to RCP SBO Opportunities Fund.  RCP currently administers $199.4 million in TRS assets.

About Teachers’ Retirement System

The Teachers’ Retirement System of the State of Illinois is the 25th largest public pension system in the United States, and provides retirement, disability and survivor benefits to teachers, administrators and other public school personnel employed outside of Chicago. The System serves 427,321 members and had assets of $51.6 billion as of June 30, 2020.

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