Texas Public Pension Funds Keep Pace with Major Benchmarks

HOUSTONApril 25, 2019 /PRNewswire/ -- The investments which Texas' public pension systems selected for securing their members' retirement benefits fit closely with their long-term expectations for returns and exceeded global benchmarks. The findings are from the latest survey of 63 responding public employee retirement systems for police, firefighters, and municipal employees performed by the Maples Group for the Texas Association of Public Employee Retirement Systems.

The survey respondents – nearly two-thirds of the systems monitored by the Texas Pension Review Board – had a 7.3 percent composite return for the 20-year period ended September 30, 2018.

"It's very important that pension funds have strong long-term performance to match their employees' anticipated career path and retirement goals," said Paul Brown, the president of TEXPERS' Board of Directors. "Our members' ability to get close to future targets is remarkable. It is comforting to public employees who want to know their benefits will be there after 20 or more years of service."

While the groups' composite returns slightly underperformed their collective goal of 7.4 percent, they outperformed a widely recognized industry benchmark of global stocks and bonds. They beat, by 1.8 percent, a passive 60 percent allocation to the MSCI ACWI Index and a 40 percent allocation to the Bloomberg Barclays Global Aggregate over the last two decades on an annualized basis net of fees.

"It is remarkable how the pension systems have handled the preceding 20-year period," said James Perry, the Maples Group study coordinator. "Considering that it included the Dot-Com bubble and bust of 1998-2003, the global financial crisis of 2007-09, and the uncertainty of quantitative easing and its unwinding, it's safe to say that as a group these systems have successfully navigated some of the worst that the global markets have thrown at them. It's a credit to their ability to manage their members' retirement assets."

TEXPERS released its yearly "Report on the Asset Allocation and Investment Performance of Texas Public Employee Retirement Systems" at its 30th Annual Conference for pension fund trustees and staff in Austin. The study confirmed that Texas pension funds hold 51 percent of their dollar-weighted asset allocations in domestic and international stocks. Alternative strategy investments comprised 28 percent and fixed income 20 percent of their portfolios. The respondents manage $58.45 billion in combined total assets.

Overall Texas pension funds continued to orient their target rates toward more conservative expectations. The average rate in 2018 was 7.4 percent, down from 7.5 percent in 2017, and 8.0 percent in 2013. By lowering their target rates, the pension systems have responded to widespread sentiment that the higher returns of the late 1990s and early 2000s may not be possible in future market and economic environments.

Brown recognized the following standout systems for 20-year performance above the target:

8.71 percent – Houston Municipal Employees Pension System

8.33 percent – CPS Energy Employees' Benefit Trust

8.20 percent – Austin Police Retirement System

   

ABOUT TEXPERS

The Texas Association of Public Employee Retirement Systems is a voluntary nonprofit association that provides education and legislative advisory services to the trustees, administrators, professional service providers, and employee groups that manage the retirement money of police officers, firefighters, and municipal and district employees in cities across Texas. It's 80+ members represent nearly 300,000 active and retired employees and manage more than $22 billion in retirement assets.