How PSERS Pa. Teachers' pension fund beat market indexes in 2016

PSERS, the $50 billion+ Pennsylvania Public School Employees' Retirement System, says it posted 2016 calendar-year returns of 10.7%, as its mix of energy, real estate, private, stock and bond investments outperformed both its 7.25% long-term annual target, and other large area pension systems.  See PSERS' brief year-end investment report here.

"All major asset classes PSERS invested in generated positive returns," chief investment officer James H. Grossman Jr. said in a statement. "Energy Master Limited Partnerships, U.S. Equities, Risk Parity, and Commodities were the best performing asset classes in 2016.”

By comparison, Philadelphia's pension plan returned 6.7 percent, the Pennsylvania State Employees' Retirement System returned 6.5 percent, and Montgomery County, which in 2013 fired its investment managers and put most of the fund into Vanguard index funds, returned 7.5 percent.

PSERS' outperformance reversed last year's results, when it trailed the other plans -- again due in part to its energy investments, which lagged that year as oil prices tumbled. 

PSERS also said it returned 5.75 percent, annualized, for the past three years, and 7.43 percent over the five-year period ended December 31, 2016, meeting its  long-term 7.25% target, which PSERS says it has also exceeded over the past 25 years.  

Looking ahead, Grossman concluded: "We remain optimistic about the current fiscal year.  If the markets continue to do well, PSERS appears on track to beat its earnings assumption of 7.25 percent for the current fiscal year which ends June 30th.  PSERS asset allocation is performing as expected, generating good returns while prudently controlling investment risk.”