STRS Ohio’s Total Fund Returns 29.28% for Fiscal Year 2021 — Highest in 38 Years; Active Management Adds Approximately $790 Million in Value
At the August meeting of the State Teachers Retirement Board, Investment Department staff reported that STRS Ohio’s total fund gross return for the fiscal year ending June 30, 2021, was +29.28%. The total fund net return* was +29.16%. This follows gross returns of 3.14% in fiscal 2020 and 7.13% in fiscal 2019. The fiscal 2021 return was the highest since 1983 and beat the total fund benchmark by 1.18% (net of all internal and external management fees and costs, including carried interest and other fund expenses). The system’s active management of the funds, rather than relying on index funds, added approximately $790 million in value after all investment costs during the fiscal year. Total fund assets increased by $17.7 billion during the fiscal year and stood at approximately $94.8 billion as of June 30, 2021.
STRS Ohio’s fiscal 2021 return ranked in the top 20% of Callan’s public fund sponsor database of more than 200 public funds. Callan serves as an investment consultant to the Retirement Board. The strong performance was led by a +46.3% return on domestic equities and a +45.0% return on alternative investments. Callan also reported that STRS Ohio’s annualized total fund gross return of 12.34% for the five-year period ending June 30, 2021, ranked in the top 10% of its public fund sponsor database while exhibiting less risk than the median of the database.
|Gross Returns||Net Returns*|
|5-year total investment return||12.34%||12.21%|
|10-year total investment return||9.97%||9.84%|
|20-year total investment return||7.87%||7.75%|
|30-year total investment return||8.72%||8.62%|
*After all management fees and costs, including carried interest and other fund expenses.
STRS Ohio Shares Response to Third-Party Report on Retirement System
STRS Ohio staff and consultants shared with the board a detailed analysis of a third-party report commissioned by the Ohio Retired Teachers Association and authored by Benchmark Financial Services (BFS) that was critical of STRS Ohio investments and operations. STRS Ohio’s analysis provided evidence which accurately describes the investment and operational practices of the system. Key points from the response included:
- STRS Ohio is committed to the principles of transparency and complies with its obligations under the Ohio Public Records Act.
- Appropriate oversight exists under Ohio law to govern the system.
- Investment fees are appropriately scrutinized, and costs and performance are accurately reported by the Retirement System.
- STRS Ohio reports its investment performance in compliance with the performance presentation standards established by CFA Institute.
- The BFS report misapplied data and incorrectly claimed STRS Ohio underperformed its policy return benchmark.
STRS Ohio’s comprehensive response to the report is available on the system’s website.
Benchmarking Report Shows STRS Ohio Ranks #1 in Service Level While Costs Show Downward Trend
CEM Benchmarking shared the results of its annual Pension Administration Benchmarking survey for fiscal year 2020 activity and STRS Ohio earned the highest service level score among all participating retirement systems. STRS Ohio has earned the top service level score in the CEM study in five of the past six years. The survey benchmarked 45 participating systems from the United States and Canada. STRS Ohio earned the highest overall service level score for the following areas of business: Call Center, pension payments, written pension estimates, member presentations, member statements and disaster recovery.
The survey also measures administrative costs per active member and annuitant. This measure showed that over the past eight years, STRS Ohio’s costs have decreased by 0.3% per year while peer costs have increased by 1.9% per year.
Board Elects Walters to Fill Retired Member Seat
At the August meeting, the board elected Rita J. Walters to fill the retired member seat for the term of Sept. 1, 2021, through Aug. 31, 2022. Walters, a retired language arts teacher from the Switzerland of Ohio School District, just completed her first term on the Retirement Board. Board members receive no compensation for service on the board other than reimbursement for actual, necessary expenses.
Stein Recognized for Board Service
The Retirement Board recognized Robert Stein for his 12 years of service as a board member, including three terms as board chair and three terms as vice chair. Board chair Rita J. Walters thanked Stein for his interest in staying current with many of the latest trends in institutional investment and his tireless work ethic.
STRS Ohio Operating Expenses Total About $1.48 Million Less Than Budgeted Amount for Fiscal 2021
Final figures for fiscal year 2021 show STRS Ohio’s operating expenses were approximately $1,484,800 less than the operating budget approved for the fiscal year. Administrative expenses totaled $102.74 million for the fiscal year ending June 30, 2021. STRS Ohio posts approved administrative expenses on its website following each board meeting.
The Retirement Board approved 1,526 active members and 164 inactive members for service retirement benefits.