TRS pension update
Thursday, Mar 12, 2020 - Posted by Rich Miller
* Wall Street has been slammed over the past couple of weeks, so I asked Dave Urbanek at the Teachers Retirement System how its portfolio was holding up…
Because the situation has been so volatile, we’re going to wait for a few weeks to see how things shake out before making a conclusion or releasing statistics. We monitor things daily, of course, but our real focus is long-term, not day-by-day or week-to-week. At the end of calendar 2019, our return was a positive 13.4 percent. Our 40-year return is 9.16 percent.
We started 2020 with $54 billion in assets – which is a record high for TRS. And for the last several years, the Board of Trustees and the investment staff have structured the portfolio in a “defensive posture” because of our low funded status.
We have recognized that any severe economic downturn could be bad for us – we have no “reserves” to fall back on. So when deciding how to invest assets, we’ve regularly performed “stress tests” on the portfolio – “what will things look like if X happens” – to help us form the defensive posture. The over-arching goal has been to preserve assets and lower risk as much as possible while making as much money as we can. For instance, we only have 36 percent of the portfolio in stocks, both in the U.S. and internationally. We have 27 percent in bonds, 15 percent in real estate, 11 percent in private equity and about 10 percent in hedge funds and other “diversifying strategies.”
- Sue - Thursday, Mar 12, 20 @ 3:28 pm:
Rich - the better question to pose is how is the outsized allocation to hedge funds helping performance in this downturn. The portfolio equity allocation was holding down performance during the record run in equities so hopefully the alternative allocation should be helping on the downside. If not the Board should terminate Rupnik
- Not a Billionaire - Thursday, Mar 12, 20 @ 3:28 pm:
The big private equity outfits Blackstone has its portfolio companies draw down their credit lines according to Bloomberg.
- Not a Billionaire - Thursday, Mar 12, 20 @ 3:32 pm:
Also how do you value a private company of any size in this environment? With credit for any risk transaction vanishing and no IPO market for big ones. What is the value of any business ?
- City Zen - Thursday, Mar 12, 20 @ 3:43 pm:
==Also how do you value a private company of any size in this environment?==
My sentiments as well. The statement TRS holds “only” 36% in stocks understates the riskiness of the overall portfolio.
- don the legend - Thursday, Mar 12, 20 @ 3:55 pm:
54 billion in assets. 36% or 19.44 billion is in stocks. If the stocks have dropped 30% then that is 5.83 billion or around 11% of the 54 billion.
Anyway you slice it. Ouch.
- Blue Dog Dem - Thursday, Mar 12, 20 @ 4:09 pm:
Sue. Curious. Are you a bond trader? Work for a money management firm? Your comments regarding pensions are usually well thought out and correct.
- Morty - Thursday, Mar 12, 20 @ 4:20 pm:
Your comments regarding pensions are usually well thought out and correct.
?
- Back to the Future - Thursday, Mar 12, 20 @ 4:50 pm:
The question was “how is the fund holding up”.
If they truly monitor the fund everyday then they could have said it is down so many billions of dollars.
Simple question. As I read the answer it seems they either don’t know or they won’t tell.
What happened to the new “transparency” in government pledge by this administration.
- Chicagonk - Thursday, Mar 12, 20 @ 4:53 pm:
Coronavirus is going to do a number on Illinois’ finances. Might be the final straw in all honesty.
- Not a Billionaire - Thursday, Mar 12, 20 @ 5:02 pm:
Don’t forget the benefit of refinancing at negative rates. Also the bond portfolio went the other way. It’s the Private Funds that worry me.
- SSL - Thursday, Mar 12, 20 @ 5:05 pm:
This is such an incredibly unique situation it is way too early to assess impact to the finances of any state.
- Marty Funkhouser - Thursday, Mar 12, 20 @ 5:36 pm:
It’s going to be a bloodbath
- TinyDancer(FKASue) - Thursday, Mar 12, 20 @ 5:45 pm:
=…the better question to pose is how is the outsized allocation to hedge funds helping performance in this downturn.’
Hedge funds are great at making money………for hedge funds.
- Anyone Remember - Thursday, Mar 12, 20 @ 7:17 pm:
==Might be the final straw in all honesty.==
For what? The budget? Pensions? Out-migration? Do explain.
- Jo - Friday, Mar 20, 20 @ 10:30 am:
Is there a possibility that our pension will be cut in the near future?