Wisconsin State Pension Fund Returns 16.89% in 2021

The fully funded state pension system surpassed its benchmark to increase its trust funds’ combined asset value to more than $147 billion.

The State of Wisconsin Investment Board reported that its $136 billion core fund, the larger of the two fully funded Wisconsin Retirement System trust funds, finished 2021 with a preliminary net return of 16.89%.

The core fund also reported preliminary five- and 10-year returns of 12.47% and 10.10%, respectively, net of fees, and it outperformed its benchmarks for the periods, easily surpassing its 6.8% annual rate of return target.

SWIB said that over the past 20 years, its active management and diversified holdings generated for the core fund $34.3 billion more than what it would have earned if it had been invested in a low-cost passive portfolio consisting of 60% global equities and 40% domestic bonds. The investment board also said its investment management has added more than $2.2 billion in value to the WRS trust funds above benchmark returns over the past five years on a preliminary basis.

“In 2021, SWIB generated strong investment returns in a market environment dominated by the ongoing effects of the coronavirus pandemic, continued substantial fiscal stimulus, and the response of the Federal Reserve while interest rates, inflation, and supply chain backlogs grabbed headlines and influenced investor sentiment,” Edwin Denson, SWIB’s executive director and CIO, said in a statement. “We have implemented a robust and diversified asset allocation that can help us navigate changes in market conditions.”

The core fund’s target asset allocation is set at 52% in public equity, 25% in public fixed income, 19% in inflation-sensitive investments, and 7% in real estate. SWIB said the figures exceed 100% due to the overall leverage of the core fund’s assets, and that the actual asset allocation may vary up to plus or minus 6% from the targets.

Meanwhile, SWIB’s $10.9 billion variable fund, an optional stock-only fund, performed even better and closed out the year with a preliminary net return of 19.95%, along with preliminary five- and 10-year returns net of external manager fees of 15.52% and 13.75%, respectively. 

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