September 3, 2015
Public Safety Personnel Retirement System
State of Arizona
September 3, 2015
Contact: Christian Palmer
PSPRS fund realizes 4.2 percent gross returns
Growth, stability during year of market volatility
PHOENIX – The state’s Public Safety Personnel Retirement System fund realized a 2015 fiscal year investment return of more than 4 percent, placing the $8.3 billion system among top public pension performers during a year marked by high stock market volatility.
The system’s 4.2 percent gross-of-fees returns fell below the assumed earnings rate of 7.5 percent, but still showcased a strong 14.1 percent net return for the PSPRS private equity portfolio. In recent years, PSPRS increased its private equity investments – and decreased holdings in stock market-traded equities – as part of its strategy to minimize risk through a broad diversification across asset classes. The 4.2 percent gross of fees performance of PSPRS places the system within the top 18 percent of 92 comparable public pension funds, according to Allan Martin, of NEPC, the Fund’s Investment Advisor.
"At first glance, the returns don’t appear impressive but they do show that our strategy is working," said PSPRS Chief Investment Officer Ryan Parham. "Our portfolio delivered results that are roughly one percent above what peers have achieved in the challenging fiscal year despite the fact we are operating with far less risk to our trust and beneficiaries."
When adjusted for measurable levels of investment risk taken, PSPRS outperformed 94 percent of its comparable peer pension funds, while the system has shown dramatic overall peer-to-peer performance ranking improvement over the course of the last 3, 5 and 10-year periods.
"The past year, and especially recent weeks, provide a clear example of the type of rocky environment this portfolio is built to withstand and even perform under," said Martin. "For five years now, PSPRS has ranked well within the top 5 percent of its peers in terms of risk-adjusted returns, while earning 9.2 percent per year in gross-of-fee returns."
The comparable returns on a net-of-fee basis are 3.7 percent for one year and 8.7 percent per year for the five-year period, respectively. On a net-of-fee basis, the fund increased in value during the 2015 fiscal year by $210 million and is now valued at more than $8.3 billion.
The PSPRS trust combined with the Corrections Officers Retirement Plan (CORP) and the Elected Officials Retirement Plan (EORP) is valued at roughly $8.3 billion and provides retirement, disability and survivor benefits to approximately 50,000 retired and active members.