Texas Employees Retirement System, Austin, returned a net 0.4% for the year ended June 30, exceeding the -2.7% return of the policy benchmark, an investment report showed.
Multiyear annualized net returns of the $33 billion defined benefit plan also topped those of its policy index in reported periods ended June 30 with 9.1% over three years, (benchmark, 6.4%); five years, 8.5%, (6.6%); and 10 years, 8.4%, (7.5%).
Texas ERS had returned a net 29.1% for the year ended June 30, 2021, vs. 20% for the policy benchmark.
The pension fund's actual allocation as of June 30 was 32.9% public equity, 19.7% private equity, 11.1% fixed income/rates, 11% private real estate, 9.8% global credit, 5.2% infrastructure, 4.8% absolute return, 2.8% public real estate, 1.7% cash and 1% special situations, according to the report.
Asset class net returns for the year ended June 30 were led by the pension fund's $3.6 billion private real estate portfolio, which produced a 28.5% net return vs. 27.3% for the benchmark, followed closely by the $6.5 billion private equity portfolio with a return of 28.4% vs. 27.2% for the benchmark.
Other positive asset class returns in the year ended June 30 were 10.7% for the $1.7 billion infrastructure portfolio (benchmark return not provided); 2.4% for the $1.6 billion absolute-return portfolio (3.6% benchmark); 0.8% for ERS' $361 million special situations asset class (0.3%); and 0.5% for the $562 million cash allocation (benchmark not provided) .
Four of ERS' asset classes had negative returns in the year ended June 30 with the retirement system's $3.2 billion global credit allocation returning returned -6% compared with -12.9% for the benchmark.
ERS' $3.7 billion fixed income/rates portfolio and its benchmark both were down 6.4% as of June 30. Public real estate totaled $914 million, down 10.7% in the year compared with -12.9% for the benchmark.
Texas Employees' largest portfolio — the $10.9 billion global equity portfolio — returned -14.6% as of June 30 vs. -6.4% for the benchmark.
In other news, trustees adopted a new target asset allocation for ERS' defined benefit plan, effective Sept. 1, during its Aug. 24 board meeting.
The new target asset allocation reduced public equity to 35% of plan assets from 37% while the allocation to private equity was raised to 16% from 13%, meeting documents showed.
Asset class targets that were increased were fixed income/rates, which rose to 12% from 11%; the weighting for the absolute-return asset class was increased to 6% of plan assets from 5%; and cash was raised to 2% from 1%.
The pension fund's infrastructure portfolio was lowered to 5% of plan assets from 7%; the allocation to global credit was reduced to 12% from 13%; and the current 1% allocation to special situations will be eliminated, the report said.
Asset class weightings that were not changed are 3% public real estate and 9% private real estate.
Texas ERS' fiscal year-end is Aug. 31.
