September 28, 2018
Public Safety Personnel Retirement System
State of Arizona
September 28, 2018
Contact: Christian Palmer
PSPRS generates $660 million in returns for FY18
7.8 percent gross return rate helps trust tops $10 billion in assets
ARIZONA – Arizona’s Public Safety Personnel Retirement System netted investment returns of nearly $660 million over the last fiscal year, with the help of strong performance by the trust’s public and private equity assets.
The fund’s investments generated a gross return rate of 7.8 percent for the year, helping the system, which serves more than 55,000 members, top the $10 billion mark in assets under management for the first time in its 50-year history. Net of fees, the overall returns stood at 7.1 percent for FY2018.
“Our investment team has made enormous strides in building a portfolio capable of producing solid returns while we take less risk than the vast majority of our peer funds,” said PSPRS Board Chairman Brian Tobin. “It can be hard to show the value of a low-risk approach in a bull market but we have to keep perspective if we want to avoid the same mistakes that led to significant losses in the past. This strategy protects our members, Arizona employers and millions of taxpayers while the system continues to recover.”
Investments in private equity made possible by 2008 changes to state law have performed admirably by exceeding benchmarks based on the Russell 3000 index, which has grown steadily during the nation’s historic bull market featuring positive returns for most of the last decade.
PSPRS investment returns in asset classes including private equity, fixed income, private credit, global trading strategies, real assets and risk parity continue to meet or outperform long-term benchmarks, while overall returns were hampered by pre-recession joint venture real estate investments.
“Our portfolio is built around the fact that we need to invest responsibly because losses over the course of even a single year could prove disastrous for some employers and potentially harm our ability to meet our obligations to retirees,” said PSPRS Chief Investment Officer Mark Steed. “This requires a balanced strategy across multiple asset classes and far less reliance on the stocks and bonds that make up the typical investment portfolio.”
The 2018 fiscal year returns are below the 9 percent threshold required under state law to trigger pension increases for retirees of the Corrections Officer Retirement Plan and the Elected Officials Retirement Plan.
PSPRS investments generated just under $3 billion of investment returns over the past five years. Retirement plans managed by PSPRS typically distribute about $1 billion of retiree, survivor and disability benefits each year.