Rudy Fichtenbaum: STRS OH v VFINX Part 1

 STRS OH v VFINX Part 1

By Dr. Rudy Fichtenbaum

April 27, 2022

VFINX is the Vanguard S & P 500 Index Fund for Investors. The following data come from https://finance.yahoo.com/quote/VFINX/history?p=VFINX and STRS Returns are from various Annual Comprehensive Financial Reports (ACFR) some of which can be found on STRS’s website https://www.strsoh.org/publications/annual-reports.html where in the interest of transparency they have the most recent 5-years of reports that are locked so you cannot copy and paste numbers from the report into a spreadsheet. They can also be found at ORSC https://www.orsc.org/reports/search?6&pageSize=10&start=1... where the reports are also locked or on the Auditor’s website where they are unlocked allowing you to cut and paste numbers and put them in a spreadsheet. https://ohioauditor.gov/auditsearch/Search.aspx Type State Teachers Retirement System into the search box. You will have to do a little hunting, but the reports are there.

I took the quarterly data for VFINX and took the last two quarters and put them together with the first two quarters of the following year to create data that is consistent with STRS’s fiscal year which runs from July 1 though June 30. I am willing to share my spreadsheet if you want to check my numbers or see how I made my graphs.

The first graph I am presenting shows annual returns for VFINX and total fund returns for STRS which are allegedly net of all expenses from FY1989-FY2021. Why start in 1989? That is as far back as I could go and get reported total fund returns for STRS.

The Vanguard S & P Index Fund outperforms STRS for 21 of 33 years. The 12 years that STRS outperforms VFINX are concentrated in the period from 2000-2009, which is why any analysis that starts in 1999 will be biased against the VFINX. These years of course include the .com bubble and the Great Financial Crisis (GFC).

In the 12 years that STRS outperformed VFINX the geometric average of the outperformance was 4.08% and in the 21 years that VFINX outperformed STRS the geometric average was 6.85%. So clearly over the 33 years taken as a whole the Vanguard S & P 500 index fund outperformed STRS.

Dr. Rudy Fichtenbaum is Professor Emeritus of Economics at Wright State University and an elected member of the STRS Board since September 1, 2021.