STRS Ohio Investment Returns for Fiscal 2022 Beat Benchmarks, Preserve $1.8 Billion in Down Year for Stocks, Bonds
During the August meeting of the State Teachers Retirement Board, Investment staff and consultants shared fiscal year 2022 investment returns. Despite challenging market conditions for stocks and bonds, STRS Ohio investments outperformed the board-approved benchmarks, preserving $1.8 billion in value for the teachers’ pension fund (net of all fees, costs and expenses).
STRS Ohio’s diversified portfolio and strong returns in the real estate and alternative asset classes helped the fund achieve a fiscal year 2022 total fund return of –3.61%, besting the total fund benchmark of –5.62%. The total fund net return was –3.73%.* Fiscal 2022 marks the first negative return in more than a decade for STRS Ohio and follows a +29.16%* total fund net return in fiscal 2021.
|Gross Returns||Net Returns*|
|5-year total investment return||8.57%||8.44%|
|10-year total investment return||9.32%||9.19%|
|20-year total investment return||8.13%||8.01%|
*After all management fees and costs, including carried interest and other fund expenses.
STRS Ohio currently manages about 70% of assets internally. CEM Benchmarking estimates STRS Ohio saves about $100 million per year through internal management. A portion of compensation for STRS Ohio’s investment staff is earned through performance-based incentives. Based on investment performance for fiscal year 2022, as well as the trailing five-year period, the Retirement Board approved performance-based incentive payments totaling approximately $9.7 million at its August meeting. Incentives are more heavily weighted toward five-year returns, aligning with STRS Ohio’s interests as a long-term investor. Only eligible investment staff are included in the PBI program.
STRS Ohio Calculates and Reports Investment Performance in Accordance With Best Practices
ACA Performance Services confirms STRS Ohio’s total fund performance is calculated and reported in accordance with the Global Investment Performance Standards (GIPS) — globally recognized as industry best practice. ACA Performance Services performs an annual verification and performance examination of the accuracy of STRS Ohio’s investment return reporting and said STRS Ohio’s GIPS compliance has been verified since 2006.
ACA shared that all requirements to be GIPS compliant have been met and also noted that the GIPS standards require net returns for asset owners which are net of all costs, including carried interest. The firm provides verification services for 62 of the 100 largest institutional investment managers.
McFee, Rhodes, Walters Recognized for Board Service
The Retirement Board recognized Robert A. McFee, Jeffrey Rhodes and Rita J. Walters for their years of service as board members. The board thanked them for serving their fellow educators and noted that pension and health care funding improved during their board tenure, two health care rebates were approved and benefits were enhanced for active and retired members.
Independent Audit Report Supports Work of STRS Ohio’s Actuary
An independent actuarial audit commissioned by the Ohio Retirement Study Council showed the work of STRS Ohio’s actuarial consultants is considered strong. The firm that conducted the study, Pension Trustee Advisors, Inc. KMS Actuaries, LLC (PTA/KMS) presented the results of its study at the August Retirement Board meeting.
The purpose of an actuarial audit is to provide an independent verification and analysis of the procedures and methods used by the STRS Ohio consulting actuary. The report concluded, “We found Cheiron’s work to be strong. It was reasonable, consistent and accurate.” The complete audit report is available on the STRS Ohio website.
The Retirement Board approved 1,201 active and 164 inactive members for service retirement benefits.