Independent Firms Say STRS Ohio Meets High Standards for Investment Performance Calculation and Reporting
During the September meeting of the State Teachers Retirement Board, the CFA Institute and ACA Compliance Group (ACA) expressed their support of third party review services for STRS Ohio’s investment performance calculation and reporting. ACA shared that it annually verifies the accuracy of STRS Ohio’s reported investment returns and noted that STRS Ohio complies with the industry’s most stringent reporting practices.
The CFA Institute is a global, not-for-profit organization that is the world’s largest association of investment professionals. Its codes and standards include the Global Investment Performance Standards® (GIPS®), considered industry best practice for investment performance reporting and presentation. CFA shared that only five U.S. pension plans are GIPS® compliant and STRS Ohio was one of the first asset owners to voluntarily adopt the GIPS® standards.
ACA Compliance Group has independently verified STRS Ohio’s compliance with GIPS® standards and STRS Ohio has been verified since 2006. ACA’s presentation to the board recognized the GIPS® standards as a commitment to the highest standard of performance calculation and presentation. ACA reported its testing verified that STRS Ohio has complied with all the composite construction requirements of the GIPS® standards and designed its policies and procedures to calculate and present performance in compliance with GIPS® standards, noting:
- STRS Ohio must have policies and procedures for all applicable provisions of GIPS® standards, including valuation, return calculation, and presentation and reporting.
- This involves rigorous testing and validation of the STRS Ohio total fund performance calculation inputs, resulting return and reporting.
- Deviation from any required provisions would result in STRS Ohio not being verified as GIPS® compliant.
In addition, ACA recently completed its investment performance and verification and examination of STRS Ohio for the fiscal year ended June 30, 2020, and verified that STRS Ohio was GIPS® compliant on a firm-wide basis.
As part of the presentation, STRS Ohio Finance staff shared the various levels of controls and oversight that the retirement system uses for investment performance calculation and reporting. The levels include internal and external reviews and can be viewed as a PDF here.
Callan Shares Capital Market Review and Economic Outlook
Part of the agenda for the September meeting of the State Teachers Retirement Board was dedicated to the annual investment seminar, which was postponed in March due to the coronavirus pandemic. The board addresses investment matters and receives updates at each meeting, and the seminar provides the board an opportunity to explore various investment topics in greater depth. As part of the seminar, one of the board’s investment consultants, Callan, provided its capital market review and economic outlook.
Callan discussed the dramatic equity market decline in February and March due to the pandemic, as well as the recovery that has taken place since. Callan shared expected risk and returns for various asset classes for the 2020–2029 time period. When applied to STRS Ohio’s neutral weight target asset allocations, the 10-year expected return is 6.62%. Callan calculated that the probability of STRS Ohio’s portfolio (at neutral weight) achieving its assumed 7.45% over the next 10 years is about 42%. Callan’s report noted the intent of its capital market assumptions is to help with long-term strategic planning. Callan said it has “gradually ratcheted down” its expectations over recent years “to reflect a lower growth environment with lower expected returns.”
The Retirement Board approved 363 active members and 62 inactive members for service retirement benefits.
Other STRS Ohio News
STRS Ohio distributing Annual Statement of Account to members
STRS Ohio recently completed its upload of Annual Statements to members’ personal accounts. More than 49,000 members have opted out of receiving paper Annual Statements through the mail and instead will view this information online through their secure STRS Ohio Online Personal Account. The paper versions of the Annual Statements are being prepared for mailing later this month.
Actuary file provides interesting facts about STRS Ohio member and retiree longevity
STRS Ohio recently completed the actuary file for fiscal year 2020 and sent it to the retirement system’s actuary, Cheiron, for the valuation report. The file provides insight to STRS Ohio member and retiree longevity. As of June 30, 2020, STRS Ohio had 209 benefit recipients who are age 100 or older (up from 198 last year). The centenarian group consists of 181 women and 28 men. Most of these centenarians are service retirees, while 55 are beneficiaries of retirees or survivors of an active member who died. The two oldest recipients are each 108 years old. The oldest retiree began teaching in 1931 for $900 a year. The retiree who has been receiving benefits the longest is a 106-year-old recipient who retired in 1969 at age 56 after 35 years of service. STRS Ohio has been paying this benefit for 51 years.
Active members have their own type of longevity in the classroom, with 22 members having 50 or more years of service and 195 members exceeding 40 years of service in the classroom. STRS Ohio salutes these individuals and all STRS Ohio members for their service to Ohio’s students.