Although billions of dollars in debt and only 40% funded, the Illinois Teacher Retirement system got some good news this past quarter when it comes to return on investments.
A press release from TRS information officer Dave Urbanek:
In the wake of the economy-crippling COVID-19 pandemic, Teachers’ Retirement
System assets experienced a $3 billion rebound during the March-to-June quarter
of fisal year 2020, climbing to a total of $51.6 billion.
Nonetheless, the worldwide effect of the coronavirus impacted TRS investments between January and the end of fiscal year 2020 on June 30. The preliminary TRS investment return for FY 2020
hovered close to the break-even mark at +0.50 percent, net of fees, on June 30. By comparison, on December 31, 2019, the half-way mark in FY 2020, the TRS rate
of return was +13.41 percent.
The System began calendar year 2020 with $54.2 billion in assets. The effects of the pandemic caused total assets to drop to $48.5 billion at the end of March. On June 30 assets totaled $51.6 billion, a +6.4 percent increase.
“Everyone took a hit during the pandemic,” said TRS Interim Executive Director Stan Rupnik. “But the investment strategies we have in place limited losses and have allowed us to prudently rebuild the portfolio’s value.”
During the January-March quarter of FY 2020, the TRS investment return was -9.95 percent, net of fees. During the previous quarter, October to December, the System’s return was +4.28 percent. The System’s return during the April to June quarter was +5.94 percent.
The TRS return between January and March, however, stood favorably compared to other economic measurements of the same period.
The Northern Trust Corporation’s analysis of the 300 largest U.S. institutional investors indicated that the median return for public pension plans between January and March was -12.6 percent. A similar analysis of public pension systems by Wilshire Associates found that the median quarterly return was -12.8 percent.
In general, the negative investment returns for various stock market measurements indicate that the TRS portfolio held up comparatively well. The Standard & Poor’s 500 index returned -19.6 percent during the quarter.
Long-term, TRS investment returns continue to exceed the System’s long-term assumed return rate of 7 percent. For FY 2020, the 40-year TRS return was +9.0
“The long-term investment returns are the most important numbers for our members,” Rupnik said. “These timeframes reflect the long-term relationship that TRS has with its members, both as active educators and as retirees. The long-term returns also indicate a successful investment program that values steady growth and strong risk management over several generations.”
So, just as the stock market has rebounded in some sectors, so have pension investments rebounded following the collapse of the market at the start of the pandemic shutdowns.
It illustrates once again an economic system where 40 million can be unemployed and the market is doing fine.
However, while TRS investment returns in context are the good news, the bad news can be found in the very last sentence of Dave Urbanek’s press release.
“The Board approved the issuance of a formal “Request for Proposals” to engage an executive search firm to assist the System in selecting a new executive director. Former Executive Director Richard W. Ingram resigned in July.”
That is the only mention of the shake-up at the top of TRS. No reason was given for Ingram’s firing. No mention of the firing along with Ingram of the chief investment officer and the general council.
But combined with the good economic report, it is clear to me that the firings weren’t over investment strategies.
Why so secret?