While the Oregon Legislature
continues to wrangle over how to best "reform" PERS, Oregon Treasurer Ted
Wheeler has just released a report showing that the Oregon Public Employees
Retirement System posted the best investment returns over the past decade of any similar-sized public retirement system fund
in the nation.
The analysis compares gross
investment returns as of Dec. 31, 2012, and found that the performance of
Oregon PERS was the highest among public funds with assets of more than $1
billion for the past one-, three- and 10-year periods.
"It's yet more evidence that
PERS is structurally sound, and that any current 'problems' are directly
attributable to the 2008 stock market crash," says longtime Oregon AFSCME PERS
lobbyist Mary Botkin. "This should be proof to current legislators that huge
overhauls of PERS are not necessary. This is not a system on the verge of
collapse, as many have tried to paint it."
Oregon PERS' independent
ranking comes from the Wilshire Trust Universe Comparison Service, a benchmark
of asset positions and performance data for investment funds of different
division has served Oregonians well and we will continue to seek the right
strategies," said Wheeler. "To maintain strong performance on behalf of Oregon,
we will need to stay ahead of the curve, and that includes constantly improving
the investment program to respond to new opportunities and risks."
The annual average return
for the past three years was 9.57 percent, and it was 8.7 percent for the past
decade. The assumed long-term rate-of-return for the PERS fund is 8 percent and
has been since 1989, but Wheeler's office says that figure could be challenging
to maintain given current low interest rates and lower projected returns for
private equity investments. The PERS board is widely expected to lower the
assumed rate for the first time in 24 years later this year; it is anticipated
they will set the rate at either 7.75 or 7.5 percent
The PERS fund relies on
investment returns to pay roughly 70 percent of the benefits negotiated for
public sector retirees.
The Oregon Investment
Council, which oversees state investment policy, is asking the 2013 Legislature
to approve the Investment Modernization and Cost Reduction Act. That proposal
will increase the capacity to manage the PERS portfolio by converting the
Investment Council to a public corporation. By increasing internal
capacity, the investment division also would be able to limit outsourcing the
management of parts of the portfolio, allowing the fund to potentially save
millions of dollars in fees annually.