Good news from STRS: 12.1% investment gain in 2005
Although major stock-market averages changed little last year, Ohio’s two biggest pension funds did significantly better.
The $69 billion Ohio Public Employees Retirement System and the $63.4 billion State Teachers Retirement System recorded investment gains of 9 percent and 12.1 percent respectively, representatives of the systems said.
Both funds have annual growth targets of 8 percent to keep them financially sound well into the future.
By comparison, the Dow Jones industrial average was down slightly last year while the S &P 500 managed only a 3 percent gain.
"We were able to produce a respectable return that beat benchmarks and contributed $4.5 billion to the overall fund" in 2005, said Jennifer C. Horn, director of investments at OPERS, the nation’s 16 th-largest pension system.
She said gains were recorded in each of the system’s asset classes, and the returns were particularly strong in the bond and private-equity portfolios that are managed by OPERS staff members, not outside investors.
STRS also topped all of its benchmarks last year by nearly 1.5 percentage points. The system, which includes public school and university teachers, had particularly strong returns in its emerging-markets stock and real-estate portfolios.
About 80 percent of STRS assets are managed by its staff; it’s 63 percent at OPERS.
The state’s smaller pension systems, which use outside advisers to manage their investment portfolios, recorded similarly strong gains.
The Ohio Police & Fire Pension Fund ended the year with assets of $10.4 billion and an 8.6 percent return, the $9.8 billion School Employees Retirement System of Ohio scored a 10.8 percent return, and the Ohio Highway Patrol Retirement System, with $712.56 million in assets, recorded a 7.3 percent investment return.
Despite the increases, actuaries say the overall funding levels at the police system and STRS are inadequate to cover their liabilities for benefit payments expected during the next 30 years, as law requires. The Highway Patrol fund also is slightly behind.
Across the United States, average pension-fund assets grew 7 percent last year, according to Watson Wyatt Worldwide, a benefits and financial-management consulting firm.
This is the third consecutive year that assets at retirement systems have grown, following a three-year stock-market slide when many pension funds lost money. But many retirement plans are struggling.
"While assets have clawed back some ground in the last three years, liabilities are likely to continue to increase" as bond yields remain low and retirees live longer, requiring bigger payouts by the pension plans, said Roger Urwin, who leads Watson Wyatt’s investment-consulting business.
OPERS had gains of 25.3 percent in 2003 and 12.5 percent in 2004. STRS recorded increases of 24.2 percent and 13.2 percent, respectively.
posted by Kathie Bracy at 11:19 AM
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