STRS Ohio Investments Return 29.16% (net) in Fiscal 2021 — Highest in 38 Years; Active Management Adds Approximately $790 Million in Value
STRS Ohio’s total fund net return for the fiscal year ending June 30, 2021, was +29.16% — the highest fund return since 1983. The net return is calculated after all management fees and costs, including carried interest and other fund expenses. The net return beat the total fund benchmark by 1.18%. STRS Ohio’s active management of the funds, rather than relying on index funds, added approximately $790 million in value after all costs during the 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. The strong investment performance prompted the board to ask STRS Ohio staff to evaluate the possibility of providing some level of inflation protection to retirees. Because Ohio law requires the system’s actuary to assess the impact of benefit changes, we expect this discussion to begin when the board’s independent actuary, Cheiron, presents to the board in October.
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% 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.
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 why STRS Ohio has among the lowest investment costs in its peer group of 17 large U.S. public fund sponsors. The report showed STRS Ohio saved about $115 million in calendar year 2019 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 2021, as well as the trailing five-year period, the Retirement Board approved performance-based incentive payments totaling approximately $6.7 million at its August meeting. STRS Ohio’s fiscal 2021 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.
Fiscal 2021 Operating Budget Reflects Slight Increase
The Retirement Board adopted system budgets for fiscal year 2022, and the operating budget ($106 million) increased by 1.7% from the fiscal 2021 budget. Final figures for fiscal 2021 show STRS Ohio’s operating expenses were approximately $1.48 million less than the operating budget approved for the fiscal year. STRS Ohio posts approved administrative expenses on its website following each board meeting.
STRS Ohio Earns GFOA Certificate of Achievement
The Government Finance Officers Association (GFOA) awarded STRS Ohio its Certificate of Achievement for Excellence in Financial Reporting for the system’s Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2020. STRS Ohio has received the GFOA award each year since 1990. STRS Ohio’s fiscal 2020 ACFR is available on the system’s website. The fiscal 2021 ACFR will be posted by Jan. 1, 2022.