Returns of Texas’ Smallest Public Pension Funds Are in the Top 60/40 Portfolios

The composite returns of 40 medium-to-small Texas public pension funds exceeded those of a 60/40 benchmark portfolio for all measured periods ending Sept. 30, according to a report by the Texas Association of Public Employee Retirement Systems, an industrial group.

The composite return of the TEXPERS universe for the year ended September 30 was 21.5% compared to 15.5% for the benchmark 60/40 index (60% MSCI ACWI index and 40% Bloomberg Global Aggregate Bond index ), according to “Report on Asset Allocation and Investment Performance of Texas Public Employee Retirement Systems.”

Annualized returns over longer periods for the pension fund composite were 10.1% (benchmark 60/40, 9.6%) for three years; five years, 10.1% (8.8%); 10 years, 8.9%, (8%); 15 years, 6.9% (6%); and 20 years, 7.7% (6.9).

By comparison, the annualized composite returns of the 42 Texas-based pension funds that participated in the survey for the year ending September 30, 2020 were 4.6% (60/40 benchmark, 9.3%) for a year ; three years, 5.4% (6.2%); five years, 7.4% (8%); 10 years, 7.3% (6.2%); 15 years, 6.4% (5.7%); and 20 years, 6% (5.2%).

The total assets of the group of 40 pension funds totaled $26.7 billion as of September 30, 2021, compared with $55 billion for 42 pension funds on the same date a year earlier.

The dramatic change in assets in the year-over-year comparison is the result of the current $35.5 billion Texas Employee Retirement SystemAustin, not submitting an investigation to the Maples Group, which conducted the investigation, Joe Gimenez, a spokesman for TEXPERS, said in an email.

Gimenez said Texas ERS assets totaled approximately $26 billion as of September 30, 2020.

The dollar-weighted average asset allocation of survey respondents as of September 30, 2021 was 52% equities, 25.5% alternatives, 23% fixed income and -0.5% short term /cash.

As of September 30, 2020, the allocation was 46% equities, 30.2% alternatives, 16.2% fixed income securities and 7.6% short term/cash.

“When dedicated public employees retire after more than 20 years of service, their retirement security depends on retirement investment performance that meets or exceeds investment goals,” said James Smith, Chairman of the Board of administration of TEXPERS,” in a press release accompanying the report.

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