Member Services — Newsletters
Economic Outlook: Growth Expected to Accelerate in Fiscal Year 2009
In its June report to the State Teachers Retirement Board, STRS Ohio’s Investment staff reviewed several factors that impacted the markets in fiscal year 2008 and provided an overview of what it sees ahead in its Fiscal 2009 Investment Plan. (STRS Ohio’s fiscal year runs from July 1– June 30.)
Staff reported that the credit crisis that shook financial markets in fiscal 2008 led to a decline in corporate earnings and was one of the prime reasons for sluggish economic performance. The downturn is expected to continue into the early part of fiscal 2009.
STRS Ohio staff expects the U.S. economy to rebound to more normal levels in the second half of fiscal 2009, and core inflation (excluding food and energy) to remain moderate. Domestic and international equities are expected to post “slightly above normal” returns, due in part to moderate valuations at the beginning of the fiscal year as well as improved economic and profit forecasts. Staff also forecasts “slightly above normal” returns for fixed-income investments, as the worst of the credit crisis appears to be over. Returns for real estate are expected to be “below normal” following several years of excellent returns.
Staff noted that inflation pressures from energy and food have not yet spread to other areas of the economy and that it does not expect the Federal Reserve Board to raise or lower short-term interest rates much during the year.
Ibbotson Associates Allocation Models Unchanged for 2008–2009
Investor profile charts were first presented to you in the Investment Options Guide that you received with your retirement plan selection kit when you were a new STRS Ohio member. You could match your investor profile — determined by your answers to the questionnaire included in the guide — to one of five potential portfolio options. Ibbotson Associates, a nationally recognized investment management company, reviews these models annually. The current charts for all five portfolio options are available online as a reference you may use as you determine your own allocation strategy. The questionnaire used to determine your investor profile is available online.
Update Allocation Choices with a Click or a Call
You can quickly and easily make changes to the asset allocation in your account by phone or on the Web. Call Nationwide Retirement Solutions toll-free at 1-866-332-3342 to monitor or change your asset allocation anytime. To ensure the security of your account, a personal identification number is required.
To access your account online, log on to the STRS Ohio Web site at www.strsoh.org. Under the heading “Related Web Sites” on the right side of your screen, click on “NRS/STRS Ohio Web Site.” Under “ACCOUNT ACCESS” in the upper right corner, you can log in to manage your account. If you have not yet established online access, select “new user setup” and you will be guided through this easy process.
Investor’s Corner
Asset Allocation
Managing your retirement assets during a turbulent market requires a large dose of patience and a little persistence. Year-to-year performance of each asset class — liquidity reserves (cash), bonds, large-cap stocks, small-cap stocks, international stocks and real estate — can vary greatly over time. Long-term investors should pause, however, before hitting the panic button when returns are choppy. Your asset allocation strategy — the decisions you make to divide your assets among different types of investments — should protect you from volatile market returns. How you choose to allocate your funds depends on your willingness to handle risk. Generally, the greater your investment risk, the greater potential return on those investments. A diverse portfolio affects both your potential risk and return, as low earnings in one type of investment may be offset by high returns in another. Asset allocation allows you to pursue strong performance while spreading out your overall risk.
Investment Choice Profile
This quarter’s SmartTalk profiles the STRS Russell 2000 Index Return.
The STRS Russell 2000 Index Return choice is comprised of approximately 2,000 small-cap U.S. equities (typically less than $1.5 billion in market capitalization) and is designed to replicate the holdings and return of the Russell 2000 stock index. Companies in the financial services, information technology, industrial, health care and consumer discretionary sectors make up about 80% of the index. Top holdings as of Dec. 31, 2007, include Hologic Inc., CF Industries Holdings Inc., Exterran Holdings Inc., Terra Industries and Priceline.com Inc. This choice is considered a long-term investment choice due to the volatility of returns on common stocks over short time periods.
Ask SmartTALK
What is meant by “Index Return”?
An index return is an investment choice that is designed to closely match the performance and composition of a particular market benchmark, such as the Russell 2000 Index or the MSCI World ex USA Index.
