Dean Dennis: What STRS isn't doing

Dean Dennis to Jim Stoll

May 11, 2017

Subject: What STRS isn't doing

Jim,

I've been going to the STRS meetings with Bob lately trying to encourage them to make investments in our interests. For instance, why has STRS lowered their earning assumption to 7.45%? This makes no sense. Are they trying to enrich their investment staff or our pension fund? I say this because S&P 500 has historically annually averaged over 9% since the 1920's. There have been sixty (60), thirty year (30) cycles from which to measure. In other words, over a thirty year cycle how much will the S&P 500 return on an annual basis? The answer is the S&P has always returned greater than 8% and over a third of the time has returned greater than 10%. Simply investing in ETFs (Equity Trading Funds) tied to the S&P 500 lowers risks and provides a greater return that STRS performance.

Also consider this, why aren't they investing significantly in other baskets of ETF's in different segments to increase what they can earn with our monies?  Here are four: XSD (a basket of semi-conductor stocks) it has returned 157% over the last 5 years, PSCT (a basket of information, software and electronic stocks) it has returned 142% over the past 5 years,-VHT (a basket of stocks tied to health care) it has averaged 124% over the past 5 years, XBI (a basket of biotech stocks) it has returned 170% over the past 5 years.

My point is the above basket of ETF's have averaged 18% annually over the last 5 years. Why are we investing in hedge funds, foreign equities and real estate. It take very little research to discover that Foreign Equities have under performed US Equities over the last 5, 10, 15, 20, 25 year periods. That said, STRS likely pays a quarter of a million annually to outside firms who either don't share this information, or it is simply ignored. Bottom-line, when you refuse to look at solid investments maybe you do need to lower your earning assumption expectations to lower than the market provides.

Dean Dennis