The pension system announced on March 7 that its returns on investments for the year 2005 were 11.45 percent. This is a decline from 2004’s total returns of 14.90% and 2003’s returns of 25.11 percent. Total returns for the three-year period ending with 2005 stand at 17.01 percent.
PSERS Chief Investment Officer Alan Van Noord credits real estate, alternative investments and international equities for the positive showing. While returns declined for the second year in a row since 2003, Van Noord notes that PSERS’ returns are still well above the median public pension plan return of 7.6% provided by Wilshire Associates. Wilshire data places PSERS within the top 10% of public pension plan performers for one-year and three-year return periods and in the top quartile of fund performers in the five- to 10-year time frame.
Alternative investments returns were 8.52% for Q4 2005 and were 27.27% for the year 2005. PSERS noted that this beats the Venture Economics Median Return standard of 2.89% for Q4 2005 and 13.29% for 2005. Private equity was outdone within the PSERS portfolio by real estate, which earned a 29.62% return for the year.
In the statement announcing the returns, PSERS Chairman Roger May said that the system reached an estimated $56.7 billion on March 1. He also said that PSERS would face challenging times ahead, “including increasing employer contribution rates.”
PSERS returns somewhat mirrored that of its counterpart, the Pennsylvania State Employees’ Retirement System (PaSERS) (see Buyouts, March 6, 2006). That pension system announced that it earned $3.8 billion last year with an investment return of 14.9 percent. This was a slight drop from 2004’s 15.1% return and a further decline from the 24.3% the system earned in 2003. Private equity led as SERS’ top performing asset class with returns up 36.5 percent.
PSERS has more than $54.8 billion in assets under management as of the end of 2005. It is the 14th largest public pension fund and the 21st largest among all pension funds in the United States. It is a limited partner in firms including Adams Street Partners, Spectrum Equity Investors, TA Associates, Madison Dearborn Partners and Landmark Partners.