Texas’ public employee pension funds returned an average of 11% in 2017, as they rode the strong gains of US equities last year, according to a survey by Maples Fund Services for the Texas Association of Public Employee Retirement Systems (TEXPERS).
The report from Maples reviewed the asset allocation and investment performance for 63 local pension systems that are members of TEXPERS, which have a combined market value of approximately $57.1 billion. It found that the 63 funds’ average annualized returns for one, three, five, 10, 15, and 20 years were 11.0%, 5.5%, 7.4%, 4.9%, 7.7%, and 6.6% respectively. Overall, the Texas public retirement system has 75 member systems, with approximately 2 million participants, and $165 billion in assets.
“The pension systems for municipal employees, firefighters, and police officers are doing their job, lowering risk and raising returns,” Max Patterson, executive director for TEXPERS, said in a release.
The local pension funds average target rate for investment returns has been edging lower in recent years, falling to 7.5% in 2017, from 7.6% in 2016, and 8.0% in 2013. While lowering the target rate reduces portfolio risk, it also requires larger contributions from plan sponsors.
The survey found that the average dollar-weighted asset allocation of the funds was 27.3% in alternative strategies, 26.9% in domestic equities, 22.2% in fixed income, 21.6% in international equities, and 2% in short-term securities/cash/other. Alternative Strategies include private equity, real estate, venture capital, marketable alternative strategies, and commodities.
For the trailing 15-year period, the survey respondents’ 7.7% return underperformed the Wilshire Median Public Fund’s 8.4% return for the same period, while for the trailing 10-year period, the funds’ 4.9% average return underperformed the benchmark’s 5.6% return for the same period.