STRS Ohio Total Investment Return Was +3.14% for Fiscal 2020
STRS Ohio’s total investment return for the fiscal year ending June 30, 2020, was +3.14%*, outperforming the benchmark return of +3.07%. This follows returns of 7.13%* in fiscal 2019 and 9.57%* in fiscal 2018. Despite the positive return on investments, total investment assets closed the year lower by about $1.8 billion, ending the year at $77.1 billion. The overall decrease is due to the system’s negative cash flow (benefit payments of about $7.5 billion in fiscal 2020 far exceeding member and employer contributions of about $3.4 billion).
Volatile investment markets during the second half of the fiscal year reflected the economic downturn brought about by the coronavirus. STRS Ohio’s total fund return stood at -5.7% through the end of March but made a strong recovery from April through June to finish the year in positive territory. STRS Ohio’s five-year annualized return for the fiscal year ending June 30, 2020, was +6.91%*, outperforming the benchmark return of 6.60%. This outperformance covered all investment costs and added about $550 million to the pension fund during this time period. Investment consultant Callan LLC shared a report that showed STRS Ohio’s investment performance ranked in the top 25% of its Public Fund Sponsor Database for the three-, five-, seven- and 10-year time periods ending June 30, 2020.
STRS Ohio currently manages about 70% of its assets through its in-house investment department. A report by CEM Benchmarking, a leading global research company, shows this in-house investment strategy is a key reason STRS Ohio had the second lowest investment costs in its peer group of 17 large U.S. public fund sponsors. The report showed STRS Ohio saved about $107 million in calendar year 2018 alone by using this internal management approach. A portion of compensation for STRS Ohio’s investment staff is earned through performance-based incentives. Based on investment performance for fiscal year 2020, as well as the trailing five-year period, the Retirement Board approved performance-based incentive payments totaling approximately $7.26 million at its August meeting. STRS Ohio’s fiscal 2020 investment performance was verified by ACA Performance Services and was in compliance with the CFA Institute Global Investment Performance Standards (GIPS), widely considered to be the best standard for calculating and presenting investment performance.
*Gross return, except for alternative investments and real estate where the return is net of all external investment management fees and costs, including carried interest and other fund expenses.
Fiscal 2021 Operating Budget Reflects Slight Decrease; Fiscal 2020 Expenses Finish Under Budget
The Retirement Board’s adopted fiscal year 2021 operating budget totaled about $104.2 million, a slight decrease from the fiscal 2020 budget. Final figures for fiscal 2020 show that STRS Ohio operating expenditures were about $3.03 million less than the operating budget approved for that fiscal year. STRS Ohio posts approved administrative expenses on its website following each board meeting.