Record-setting year lifts PSPRS to $15.7 billion total valuation

October 28, 2021

Public Safety Personnel Retirement System
State of Arizona

Contact: Christian Palmer
Phone: 602-296-3736

Record-setting year lifts PSPRS to $15.7 billion total valuation

27.8% net-of-fee returns marks best year ever for PSPRS, CORP and EORP trust

ARIZONA – PSPRS generated more than $3.1 billion in annual investment returns for fiscal year 2021, a 27.8 percent net-of-fee return that marks a new record for the state pension system serving nearly 60,000 firefighters, police officers, corrections officers, elected officials and judges.

The record returns – coupled with almost $1.6 billion in additional employer contributions to the system – helped push the trust’s final June 30, 2021, balance to $15.7 billion – also an all-time high for the system.

“We’re thrilled to see our investments generate an all-time high one-year return,” said Trustee Harry Papp, chairman of the PSPRS Investment Committee. “The numbers reflect the market growth that followed the height of the coronavirus pandemic as well as outstanding decision-making and execution by the PSPRS investment team.”

From late 2019 to early 2020, PSPRS seized on opportunities to buy public stocks during periods of steep market drops in value. Staff-recommended changes to reduce holdings in fixed income instruments in favor of greater private credit opportunities also helped generate hundreds of millions of dollars of additional investment value.

The highest performing asset classes included domestic stocks, which generated a 43.7 percent annual return, and private equity buyouts and venture capital, which generated a 53.2 percent annual return.

“The markets were obviously very cooperative but our investment staff and consultants deserve a lot of credit for their management, judgment and decision-making,” said Mark Steed, PSPRS Chief Investment Officer. “Thanks to their hard work the trust was able to grow substantially while keeping risk in check and an eye open for long-term investments.”

The 27.8 percent net of fee returns helped push all measured timeframe performance above the PSPRS Board of Trustees’ assumed earnings rate of 7.3 percent. Net of fee returns for the three-year, five-year, seven-year and 10-year periods were 10.8, 10.3, 7.9 and 7.8 percent, respectively. Gross of fee returns for the 2021 fiscal year were 28.5 percent.

In August 2020, the PSPRS Board of Trustees adopted the recommendations of staff and the stakeholder Advisory Committee to reduce the assumed payroll growth assumptions set PSPRS-managed plans and implement a shortened “layered” amortization period of 15 years. The conservative assumptions and approach to financing aims to reduce long-term pension expenses for employers and taxpayers.

Preliminary actuarial reports indicate aggregate funding level gains and corresponding decreases in unfunded liabilities for the public safety, corrections, and elected officials retirement plans. While employer contribution rates vary, aggregate employer contribution rates are expected to decrease for PSPRS and CORP plans while increasing for EORP.

“We’re very encouraged by the preliminary financial results from the combined impact of our investment returns, the board’s actuarial changes, and the incredible amount of additional employer contributions to reduce unfunded pension debts,” said Administrator Mike Townsend. “The long-term health and sustainability of the pension fund remains our top priority, but there is no question that the 2021 fiscal year has been extremely positive for our members and retirees, employers and taxpayers.”

Employer valuations for the fiscal year ending June 30, 2021, and the system’s consolidated annual reports for the public safety, corrections and elected officials plans will be completed and published before the end of the calendar year.

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