The strong performance of our private equity portfolio is helping us to strengthen the retirement security of our members and lower the cost to taxpayers and the city. That's a winning formula for everyone.
Our members are firefighters who stand ready and willing to risk their lives to save yours and mine. My job at the Houston Firefighters' Relief & Retirement Fund is to make sure that these brave men and women get the financial security they deserve when they decide to retire. Our investment returns are critical. They help to strengthen and safeguard the retirements of our fund's 6,600 active and retired members.
Our 10-member board is composed of five active firefighters, one retired firefighter and two citizen members, along with the city treasurer designee and a representative of the mayor.
Together, our goal is simple: make the smartest investment decisions we can to maximize returns, control risk and meet our obligations to our members. Private equity investment is one critical tool we use to fulfill this mission.
For the second year in a row, the Houston Firefighters' Relief & Retirement Fund was among the top ranked in the Private Equity Growth Capital Council's top 10 pension funds by private equity returns.
HFRRF earned a fourth-place spot in the private equity return ranking with a 13.6% annualized return, net of fees, over the 10 years and 9.3% over the five years, ended June 30, 2012.
Returns have shown consistency. In the 10 years ended June 20, 2011, the PEGCC study ranked HFRRF seventh best in private equity portfolio performance.
The PEGCC's report showed that private equity returns to large public funds outperformed all other asset classes with median annualized 10-year returns of 10% for the subset of 146 large public pension funds that published 10-year returns ended June 30, 2012.
It is clear that private equity can be an important part of a long-term portfolio with high required actuarial rates of return. We are pleased to be in the top performers of this asset class.
Private equity has consistently provided our fund with impressive rates of return year after year, and that is seen in our overall fund performance. For the 10-year period ended June 30, 2013, the HFRRF total portfolio, now $3.5 billion, saw a 9.7% rate of return — easily topping our actuarially determined assumption rate target of 8.5%. In fact, HFRRF is ranked first for that period of 99 public pension funds for its investment return, according to Wilshire's Trust Universe Comparison's Report.
The fund over the last 10 years has had a private equity allocation target of 12% and actual range between 11% and 18%.
The strong performance of our investment portfolio is driven by a small internal team, the members of which have been together since 2003, and carefully selected external managers. We work closely with the HFRRF's board of trustees to align strategy and decision-making with the requirements of the organization and needs of our firefighter members.
I'm proud of HFRRF's stellar performance.
Christopher E. Gonzales is executive director and chief investment officer of the Houston Firefighters' Relief & Retirement Fund.