HARRISBURG, PA — The Pennsylvania Public School Employees’ Retirement System (PSERS) Board of Trustees voted last week to approve new investment commitments totaling up to $1 billion. This move aims to strengthen the financial health of the state’s public school retirement fund.
The board’s decision involves two separate votes. They allocated $500 million each to core fixed income funds managed by Garcia Hamilton & Associates LP and JP Morgan Asset Management LP. These investments are designed to provide stable returns while managing risk, a critical strategy for ensuring the long-term sustainability of the pension fund.
Beyond these investment commitments, the board also passed resolutions to sell real estate assets held by PSERS through two holding companies: Keystone-Florida Holding Corp. and Commonwealth Holdings, Inc. This action is part of PSERS’ broader strategy to effectively manage its asset portfolio.
Additionally, the investment committee reviewed a net investment performance report for the quarter ending September 30, 2023. The results showed a -2.22% return for the quarter. However, longer-term performance appeared more favorable: 6.02% over one year, 7.41% over three years, 6.56% over five years, and 6.92% over ten years.
“While the near-term results were to be expected given the drawback in equities markets and rise in interest rates over the period, PSERS performance over the third quarter outpaced internal benchmarks of -2.71% and were not materially dissimilar from median peer performance of -1.63% for the period,” said PSERS Chief Investment Officer Ben Cotton.
Cotton noted that preliminary data for the fourth quarter of 2023 shows a positive trend. “Preliminary Q4 performance data shows a positive trend based on public market proxies and reported private market returns, resulting in preliminary estimated returns of approximately 6% for the total plan for Q4 and just over 8% for the full 2023 calendar year,” he said.
The board also examined a report on total investment costs from CEM Benchmarking, an independent consulting firm. The report, covering the 2022 calendar year, highlighted that Defined Benefit (DB) investment costs were low compared to PSERS’ peer group. Costs decreased from 100.6 basis points in 2018 to 60.9 basis points in 2022. The full report will be posted online.
Securing Retirement Futures: PSERS’ Strategic Financial Stance
These decisions and reports are crucial for the ongoing management and transparency of PSERS. By committing substantial funds to core fixed income investments, the board aims to ensure steady returns and manage risks amid fluctuating market conditions. The sale of real estate assets further aligns with PSERS’ strategy to optimize its asset allocation.
Understanding the performance and cost structure of the pension fund is vital for stakeholders, especially the public school employees who rely on PSERS for their retirement security. The positive trends in recent performance data suggest that the fund is on a stable path, which could help mitigate concerns about the sustainability of retirement benefits.
Lower investment costs indicate efficient management of the fund’s resources, potentially translating to better net returns for beneficiaries. Efficient cost management means more funds are retained within the system, enhancing its ability to meet future obligations.
As PSERS continues to refine its investment strategies and maintain transparency with regular performance reporting, it reinforces its commitment to securing the financial future of Pennsylvania’s public school employees. This proactive approach is essential in navigating complex economic landscapes and ensuring the long-term health of the retirement system.
With these strategic moves, PSERS not only aims to enhance its portfolio performance but also to maintain trust and confidence among its stakeholders. As the board prepares to release final fourth-quarter performance data, the focus remains on achieving sustainable growth and stability for the benefit of all its members.
For the latest news on everything happening in Chester County and the surrounding area, be sure to follow MyChesCo on Google News and Microsoft Start.