Investments and Financial News Update
STRS Ohio Investments Post Net Return of 7.55%
At the August Retirement Board meeting, STRS Ohio reported that the pension fund posted a net return of 7.55% for the year ended June 30, 2023. This translates into $2.4 billion more for the teachers of Ohio, even after payment of more than $7 billion in benefits. The pension fund ended fiscal year 2023 with $90.1 billion in investment assets.
As a mature pension system that pays out more in benefits than it receives in contributions, STRS Ohio relies on the performance of its investments as a key source for funding benefits. STRS Ohio’s investment consultant, Callan, shared that STRS Ohio’s total fund return outperformed its benchmarks and ranked in the top 10% of public funds tracked by Callan for the three-, five- and 10-year periods ending June 30, 2023.
Board Adopts Fiscal 2024 Budgets
The Retirement Board adopted the system’s operating and capital budgets for fiscal year 2024 (July 1, 2023–June 30, 2024). The approved operating budget totals $115.6 million, a 2.8% increase over the previous fiscal year. The approved capital budget totals $8.3 million.
Board Approves Revisions to PBI Program
The board approved several changes to the Performance-Based Incentive (PBI) Program that is part of the compensation package for eligible Investment staff. Such programs are common among large pension plans like STRS Ohio that manage a significant portion of assets with internal staff instead of outside money managers.
The changes approved for fiscal 2024 (current fiscal year) include:
- Removing more than 30 positions from the PBI Program.
- For those still participating in the PBI Program, reducing the maximum incentive possible.
- A simplified formula to calculate PBI reductions when the pension fund has a negative absolute return.
- A 10% reduction to PBI payments in any year where the board’s actuary determines there is not sufficient funding to enhance member benefits.
Based on the performance of STRS Ohio investments for fiscal year 2023 and the trailing five-year period, the board approved approximately $8.6 million in performance-based incentive payments. Incentives are more heavily weighted to five-year returns, aligning with STRS Ohio’s interests as a long-term investor.