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Lower return assumption trend continues

Pensions & Investments reported Monday that Texas Teacher Retirement System lowered its assumed rate of return to 7.25% from 8%. Declining return assumptions have been a trend among public pension plans since 2011, when the long-standing median of 8% began to decline. The declines resulted from plans facing a new reality that their previously held long-term return expectations may not be feasible.

The average three-, five- and 10-year returns for plans observed by P&I for the fiscal year ended 2017 were 5.4%, 8.95% and 5.5%, respectively, while the average 20-year return was 7.0%.