US. State pension funds significantly beat expected investment returns
The Kentucky Public Pensions Authority (KPPA) announced the average composite return for assets under management was 10.7% for the fiscal year ended June 30, 2024, while insurance trust assets under management earned 11.4%.
All pension and insurance portfolios returned significantly more than their actuarial assumed rates of return, which are 6.5% for all County Employees Retirement System (CERS) pension and insurance portfolios and the Kentucky Employees Retirement System (KERS) and State Police Retirement System (SPRS) insurance trusts, 6.25% for the KERS Hazardous pension portfolio, and 5.25% for the KERS Nonhazardous and SPRS pension portfolios.
The CERS Nonhazardous and Hazardous pension and insurance portfolios returned an average of 11.7% during the fiscal year. Kentucky Retirement Systems (KRS) pension and insurance portfolios returned an average of 10.6%. KRS comprises the pension and insurance plans for KERS Nonhazardous and Hazardous employees and SPRS.
That performance also bested the median return of an index of large public pension funds. The median return for the Wilshire Trust Universe Comparison Service (TUCS) peer group of public funds with more than $1 billion in assets was 10.5% for year ended June 30, 2024.
This is the second consecutive year that CERS and KRS pension and insurance portfolio returns have neared or exceeded 10%. Investment returns, General Fund appropriations authorized by the Legislature, and employer contributions boosted total assets in the systems operated by KPPA increased to a record $26.9 billion in Fiscal Year (FY) 2024, an increase of $3 billion in the year since June 30, 2023.
“Our disciplined investment strategy and focus on diversification continue to produce strong risk adjusted performance for the systems and participants,” said Steve Willer, KPPA Chief Investment Officer.
Over 10-, 20-, and 30-year periods, all system and insurance portfolio returns exceed their actuarial assumed rates of return, and either nearly meet or exceed their benchmarks.
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