Kentucky Pension Fund Reports Record 25% Return for Fiscal 2021

The strong showing lifts long-term return rates above assumed rates for the first time in a decade.

The Kentucky Public Pension Authority (KPPA) reported that the state’s pension and insurance funds for government employees and police collectively returned 25% net of fees for the fiscal year ended June 30, raising the funds’ total asset value to $22.7 billion.

The KPPA said it is the highest single-year return in the history of the organization— surpassing the 24% return recorded in 1997—and that it will improve all 10 plans’ funded status and help reduce employers’ pension costs. The final calculations for the plans’ funded ratio have not yet been calculated by the actuary.

The state pension authority also said the record performance raised the long-term rates of return for the pension and insurance funds above their actuarial assumed rates of return for the first time in 10 years. The actuarial assumed rates of return are 5.25% for the Kentucky Employees Retirement System (KERS) Nonhazardous and State Police pension funds, and 6.25% for all other pension and insurance funds.

“The returns above the benchmarks mean that our investment staff and committees added over $100 million to the assets versus the alternative of having passive [indexed] portfolios,” KPPA Executive Director David Eager said in a statement.

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KERS returned 22.58%, ahead of its benchmark’s return of 22.22%, and reported three- and five-year annualized returns of 9.88% and 9.84%, respectively.

Private equity was the top performing asset class for KERS’ portfolio, returning 53.24% and matching its benchmark’s return, followed by US equity, which returned 44.86% and beat its benchmark by 36 basis points. Meanwhile non-US equity returned 37.75%, ahead of the 37.18% registered by its benchmark.

The County Employees Retirement System (CERS) reported a return of 25.69% net of fees for fiscal 2021, ahead of its benchmark’s return of 24.83%, and with three- and five-year annualized returns of 10.25% and 10.65%, respectively.

US equity was the top performing asset class for CERS, returning 44.80% and beating its benchmark’s return of 44.16%. Private equity was the next best performing asset class, matching its benchmark’s return of 39.94%, followed by non-US equity, which returned 37.78% and edged out its benchmark’s return of 37.18%.

As of the end of June, the asset allocation for CERS’ investment portfolio was 23.74% in US equity, 23.18% in non-US equity, 16.81% in high yield, 13.04% in core fixed income, 8.18% in private equity, 6.63% in real return, 3.78% in real estate, 2.62% in “opportunistic,” and 2.02% in cash equivalent.

The asset allocation for KERS was 23.29% in US equity, 22.71% in non-US equity, 1.05% for high yield, 13.32% for core fixed income, 7.50% for private equity, 6.29% for real return, 3.72% for cash composite, and 2.40% for opportunistic composite.

Additionally, the State Police Retirement System (SPRS) returned 21.72% for the year, surpassing its benchmark, which returned 19.93%. Private equity and US equity were the portfolio’s top performing asset classes, returning 46.63% and 44.71%, respectively. The private equity assets matched their benchmark’s return, while the US equity assets beat their benchmark by 55 basis points. And non-US equity assets returned 37.71%, ahead of their benchmark’s return of 37.18%.

The asset allocation for SPRS as of the end of June was 23.01% in core fixed income, 18.18% in US equity, 17.30% in non-US equity, 17.01% in high yield, 6.38% in real return, 6.28% in cash composite, 5.55% in private equity, 3.9% in real estate, and 2.39% in “opportunistic.”


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