TCRS Sees 11.4% Returns in Fiscal 2017

Pensions, state budgets “are as vulnerable as they have ever been,” PEW Retirement Officer says.

Driven by a strong stock market performance thanks to its large equities stake, the $47 billion Tennessee Consolidated Retirement System (TCRS) realized 11.4% returns in fiscal year 2017, well above the 7.5% benchmark.

“The central banks of the world have continued to intervene in both the stock and the bond markets, creating demand,” said Stephen Frohsin, a principal at Woodmont Investment Counsel in Nashville in an interview with the Tennessean. “When you have earnings growth and you have, in some cases, robust economic activity, then that naturally leads to higher stock prices.”

This brings the five and 10-year returns to 8.7% and 5.9%, respectively.

The TCRS, which pays 137,000 higher education, K-12 public schools, and at 500 local government retirees, has not seen double digit returns since 2014’s 17%. In fiscal years 2016 and 2015, the largest fund managed by Treasury saw slim returns at 2.8% and 3.3%.

Despite small returns in recent years, Tennessee is one of the top performing states in the country. According to a July report from PEW Charitable Trusts, only eight states were more than 90% funded in 2015, including Tennessee. In an April PEW report, only three states had better funding ratios than “The Volunteer State” in the same year.

While most indicators show pensions have stabilized, Aleena Oberthur, PEW’s Officer of the States’ Public Sector Retirement Systems told the Tennessean that they are still not out of the woods when it comes to a full recovery from 2008 and 2009 losses, which Tennessee experienced -1.2% and -15.3% returns.

“Pension funds and state budgets are as vulnerable as they have ever been to the next economic downturn,” Oberthur said, also adding that the state’s hybrid plan, a 401(K)-style plan which raised the full benefit retirement age from 60 to 60 implemented in 2014 to be a benefit for both employees and taxpayers. “There are exceptions, of course, and Tennessee is one of them.”

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