NASRA finds public pension funds’ long-term returns outperform assumptions


The median annualized return for public retirement systems exceeded the most common assumed rate of return, according to a new issue brief from the National Association of State Retirement Administrators.

The median annualized return was 8.9% for the 25-year period ended Dec. 31, and 7.8% for the 10 years.

For the 126 plans included in NASRA's Public Fund Survey, the predominant assumed rate of return is 8%, but the average is 7.77%. The plans held $3.05 trillion in assets by the end of 2012, based on Federal Reserve data.

Nearly half of the 126 plans have reduced their investment return assumptions since fiscal 2008, according to NASRA.

“Since 1987, a period that has included three economic recessions and four years when median public pension fund investment returns were negative, public pension funds have exceeded their assumed rates of investment return,” the brief concluded.

Keith Brainard, the Georgetown, Texas-based research director for NASRA, said the results “reinforce the importance of taking the long-term view. Investment returns need to be considered over decades, not over individual years. It's helpful to keep in mind that hitting your real rate of return in a low-interest-rate environment is value added to the portfolio,” he said in an interview.