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Smaller Texas public pension funds' returns top 60/40 portfolios

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Composite returns of 40 mid- to smaller-size Texas public pension funds topped those of a 60/40 benchmark portfolio in all measured time periods ended Sept. 30, said a report from Texas Association of Public Employee Retirement Systems, an industry group.

The composite return of the TEXPERS universe for the year ended Sept. 30 was 21.5% compared with 15.5% for the 60/40 benchmark (60% MSCI ACWI index and 40% Bloomberg Global Aggregate Bond index), according to the “Report on the Asset Allocation and Investment Performance of Texas Public Employee Retirement Systems.”

Annualized returns over longer periods for the pension fund composite were 10.1% (60/40 benchmark, 9.6%) for three years; five years, 10.1% (8.8%); 10 years, 8.9%, (8%); 15 years, 6.9% (6%); and 20 years, 7.7% (6.9).

In comparison, the annualized composite returns of the 42 Texas-based pension funds that participated in the survey for the year ended Sept. 30, 2020, were 4.6% (60/40 benchmark, 9.3%) for one year; three years, 5.4% (6.2%); five years, 7.4% (8%); 10 years, 7.3% (6.2%); 15 years, 6.4% (5.7%); and 20 years, 6% (5.2%).

Aggregate assets of the group of 40 pension funds totaled $26.7 billion as of Sept. 30, 2021, compared with $55 billion for 42 pension funds as of the same date a year earlier.

The dramatic change in assets in the year-over-year comparison was the result of the now $35.5 billion Texas Employees Retirement System, Austin, not submitting a survey to Maples Group, which conducted the survey, said Joe Gimenez, a TEXPERS spokesman, in an email.

Mr. Gimenez said Texas ERS’ assets totaled about $26 billion as of Sept. 30, 2020.

The average dollar-weighted asset allocation of survey respondents as of Sept. 30, 2021, was 52% equities, 25.5% alternatives, 23% fixed income and -0.5%short-term/cash.

As of Sept. 30, 2020, the allocation was 46% equities, 30.2% alternatives, 16.2% fixed income and 7.6% short-term/cash.

“When dedicated public employees retire after 20-plus years of service, their retirement security hinges on pension investing performance that meets or exceeds investment targets,” said James Smith, president of TEXPERS’ board of directors,” in a news release accompanying the report.