December 1, 2020
Public Safety Personnel Retirement System
State of Arizona
December 1, 2020
Contact: Christian Palmer
PSPRS generates $182 million in returns for FY20
0.91 percent net returns for year amid pandemic, global economic challenges
PHOENIX – Arizona’s Public Safety Personnel Retirement System generated $182 million last fiscal year for the trust serving Arizona’s firefighters, police officers, corrections officers, elected officials and judges, a 0.91 percent net-of-fee investment return for the system.
In doing so, trust assets were valued at more than $10.9 billion by the fiscal year end of June 30, 2020. Overall performance and investment values across nearly all asset classes for the fiscal year were hampered by the global economic impact of the coronavirus, particularly in late February and March.
“Last fiscal year proved extremely difficult for nearly all investors but we can accept that the PSPRS portfolio provided the stability, resilience and positive returns that it was designed to deliver,” said Harry Papp, chairman of the PSPRS Investment Committee. “We’ve seen a substantial recovery in public and private markets since late-June and we’ll continue to focus on the long-term health and performance of the fund.”
The 2020 fiscal year returns and returns over longer timeframes fell below the 7.3 long-term assumed earnings rate set by the PSPRS Board of Trustees. Still, rebounding markets for the first quarter of fiscal year 2021 have pushed the overall value of the PSPRS trust to nearly $11.6 billion dollars.
Market conditions for the fiscal year timeframe between July 1, 2019, and June 30, 2020, created subpar returns for all asset classes with the exception of private credit and venture capital opportunities. These asset classes in the PSPRS portfolio helped dampen volatility and underperformance in public markets, particularly international equities and energy sectors, and real estate.
“Our plan is to continue to be opportunistic, taking advantage of diverse investment opportunities and pushing long-term returns upwards,” said PSPRS Chief Investment Officer Mark Steed. “The investment team, our board, and our consultants recognize that this was an extreme year for volatility. Fortunately, the PSPRS portfolio has been crafted to diminish risk, which helped the fund perform fairly well under the circumstances. As ever, our eyes are on protecting the trust and taxpayers and sufficient returns to provide for our members’ pensions.”
While PSPRS seized on opportunities in late 2019 and throughout February and March 2020 to buy public stocks during periods of steep market drops in value, the pension still maintains one of the nation’s most diverse public pension trusts through its heavy allocation to private market assets.
For the second consecutive year, PSPRS was recognized as an elite private equity investor among more than 170 U.S. public pensions. Its private equity investments – which include the buying, improving, and selling of assets like businesses and other venture investments – generated an annualized return of 15.44 percent for PSPRS over the 10-year period between fiscal years 2009 and 2019. The net-of-fee returns ranked PSPRS eighth overall out of 176 pension plans with more than $1 billion in assets, according to the American Investment Council.
Actuarial valuations for the 2020 fiscal year indicate that the overall funded status of the public safety trust increased to 46.9 percent from 46.4 percent for the fiscal year. Likewise, the elected officials retirement plan funded status increased slightly to 32.1 percent from 31.5 percent. The corrections officers retirement fund decreased in funded status to 52.1 percent from 53.1 percent.
PSPRS is governed by a nine-member board consisting of members of PSPRS-managed plans and civilian investment and financial experts.