Illinois TRS Investment Return Declined in FY 2012

“We will always take a long-term view of investment returns because TRS has to be there for our members for decades to come,” said TRS Executive Director Dick Ingram. “We didn’t do handsprings over 23.6% last year and we aren’t crying over 0.76% this year. It is the long-term results that matter and the system’s 20-year investment return at the end of June was 7.73%.”

Ingram added that the 0.76% rate of return for TRS falls in line with the investment returns for FY 2012 being reported by other large public pension systems across the country. Many saw their investment returns drop from more than 20% to less than 4% in a year’s time. 

Between April and June, TRS investments recorded a negative 1.52% return. However, between July and September, TRS investments saw a positive 4.8% return. While the TRS investment return was 0.76% for the 12-month period that ended in June, for the 12-month period ending on September 30, the TRS rate of return was a positive 16.4%. In the last 10 years, TRS investments have recorded positive returns in eight years, with the two years of negative returns seen during the global financial collapse of 2008 and 2009.

During FY 2012, TRS realized its strongest gains from its investments in real estate, which returned +9.91%. The system also saw positive returns from its investments in bonds (+5.68%), private equity (+3.76%), hedge funds (+2.62%), real return securities (+2.54%) and stock held in U.S. companies (+0.96%). TRS investments in international stocks recorded a negative 11.71% rate of return, which affected the positive gains in the other six investment categories. All of the return rates were calculated after all investment fees had been subtracted from the total assets in each portfolio.

TRS ended FY 2012 on June 30 with $36.3 billion in assets, which places it among the top 40 largest pension funds in the United States.

For fiscal year 2014, TRS Board of Trustees set state government’s funding contribution at $3.438 billion, a 27.2% increase over last year’s contribution, but still not enough to fully fund TRS over the next 30 years. The annual contribution is the amount of money required by state law to fund TRS pensions during the coming year, as well as a payment on the system’s unfunded liability, which currently stands at $53.5 billion. The unfunded liability in FY 2011 was $43.5 billion.

The system’s funded ratio declined during FY 2012 from 46.5% in FY 2011 to 42.1% at the end of June, 2012. The funding shortfall is due primarily to years of insufficient state funding coupled with FY 2012’s decreased investment earnings.