The Teachers’ Retirement System of Oklahoma returned a dismal 4.6% in the fiscal year ended June 30, Pensions & Investments reports.
The plan’s results were soundly beaten by its benchmark and assumed rate of returns, which are 6.99% and 7.5%, respectively.
The plan’s three-, five-, and 10-year returns as of June 30 were 9.67%, 5.81%, and 10.63%, respectively. And although the three- and 10-year periods surpassed their 9.61% and 10.34% benchmarks, five-year results were about 50 basis points shy of their 6.32% expectations.
Equities were largely to blame for this fiscal year’s underperformance, especially small- and mid-cap stocks, with which the retirement organization is overweight. More than 50% of its holdings are in both foreign and domestic equities. Despite US stocks returning 5.69%, international equities lost 2.86% over the duration.
Oklahoma Teachers’ also saw poor results from its master limited partnership (MLP) allocation, which dropped 2.93%.
So what worked for the plan? The answer lies in alternatives. Private equity and non-core real estate returned 19.56% and 20.17%, respectively. Bonds also did well, returning 8.76%. Core real estate returned 5.76%.
Despite those performances, the stronger sectors do not take up enough of the portfolio to offset the stock and MLP drops. Private equity and real estate combined are slated to reach 14% of the total asset mix. Bonds are scheduled to hold 23.5% of the portfolio. Stocks and MLP targets are set for 57.5% and 5%, respectively.
The Oklahoma Teachers’ Retirement System held $16.62 billion in assets under management as of June 30, 2018. The fund returned 9.69% for the fiscal year ending in mid-2018, according to its comprehensive annual financial report.
The fund could not be reached for comment. Current allocations were not disclosed.