STRS Ohio Total Fund Returns +14.29% for Fiscal Year 2017
STRS Ohio’s total fund return for the year ending June 30, 2017, was +14.29%; it’s highest return since fiscal 2014. This follows returns of +0.92 in fiscal year 2016 and +5.45% in fiscal 2015. The value of investment assets as of June 30, 2017, was $75.1 billion, an increase of about $5.2 billion from the June 30, 2016, level of $69.9 billion.
The return beat the total fund benchmark by 0.63% after fees. The system’s active management of the funds, rather than relying on index funds, added approximately $400 million in value after all investment costs during the fiscal year. The strong performance was led by a +22.2% return on international investments and a +19.6% return on domestic equities. STRS Ohio’s fiscal 2017 total fund return ranked in the top 20% of Callan Associates’ public fund sponsor database. Callan serves as an investment consultant to the Retirement Board. While the investment returns are good news for the retirement system, STRS Ohio still needs to improve on its funded ratio of 75.1%.
STRS Ohio manages more than 70% of its assets through its in-house investment department. A report by CEM Benchmarking, a leading global research company, shows that STRS Ohio’s internal investment strategy is a key reason that the retirement system has the second lowest investment costs in its peer group of 17 large U.S. public fund sponsors. The report showed STRS Ohio saved about $102 million in 2015 alone by using the internal management approach. A portion of compensation for STRS Ohio’s investment staff is provided through performance-based incentive (PBI) payments. Based on the investment performance for fiscal year 2017, as well as the trailing five-year period, the Retirement Board approved PBI payments totaling approximately $9.22 million at its September 2017 meeting.
Fiscal Year 2018 Budget Reflects 2.8% Increase; Fiscal 2017 Operating Expenses Finish Under Budget
STRS Ohio’s adopted operating budget for fiscal year 2018 totals about $99.6 million, an increase of about 2.8% more than the fiscal 2017 budget. The capital budget for fiscal 2018 totals $3.3 million, an increase of 1.7% more than the fiscal 2017 budget. Final figures for fiscal 2017 show that STRS Ohio’s operating expenditures were approximately $96.5 million, about $340,000 less than the budgeted amount.
The Retirement Board and staff remain mindful of expenses. The fiscal 2018 budget is within one percent of the fiscal 2009 operating budget, and the number of full-time equivalent staff members has decreased from a high of 735 associates in 2001 to 544 associates in fiscal 2018. Throughout the year, the Retirement Board reviews monthly expenditure totals as part of its regular meetings. The information is also posted on STRS Ohio’s website following the board meetings.
Direct Deposit Keeps Funds Flowing Through Storms
STRS Ohio deposits benefit payments directly into benefit recipients’ accounts on the first banking day of each month. Even as late August and September storms took a toll on Texas, Florida and much of the southeastern United States, benefit recipients who live in those areas saw their benefits deposited accurately and on time. Other than Ohio, the state where the most STRS Ohio benefit recipients reside is Florida, with about 7,500 benefit recipients. A little more than 900 benefit recipients live in Texas and 13 benefit recipients live in Puerto Rico.