Pennsylvania Public School Employees' Retirement System, Harrisburg, posted a net return of 9.3% for the fiscal year ended June 30, said a news release issued by the $56.7 billion pension fund. This exceeded the pension fund's benchmark of 7.95%.
PennPSERS' board also reported annualized net returns of 6.8%, 7.6%, 5% and 7.9% for the for the three, five, 10 and 25 years ended June 30, respectively. The pension fund returned a net 10.14% for the fiscal year ended June 30, 2017.
PennPSERS' chief investment officer James H. Grossman Jr., said in the news release that the pension fund's "fiscal-year performance was driven by very strong performance in private equity, U.S. equity, non-U.S. equity, private real estate and private credit."
Broken down by asset class, private equity returned 16.26% for the for the year ended June 30; U.S. equities, 14.02%; real estate, 13.63%; international equities, 10.44%; high yield/private credit, 10.13%; risk parity, 6.76%; commodities, 5.36%; absolute return, 4.85%; global inflated linked fixed income, 3.58%; emerging markets fixed income, 3.54%; non-U.S. developed markets fixed income, 2.37%; infrastructure, 1.39%; U.S. core-plus fixed income, 0.93%; master limited partnerships, 0.27%; and U.S. long treasuries, -2.11%.
Mr. Grossman admitted, however, that "most of the returns were earned in the first half of FY 2018," and that the "second half of FY 2018, and continuing into FY 2019, has been more challenging as interest rate hikes in the U.S. are starting to have an impact along with slowing global growth."
The PennPSERS board has been looking to reduce the pension fund's risk exposure, Mr. Grossman added.
As of June 30, the pension fund's asset allocation was 36% fixed income, 35% equities, 26% real assets, and 10% each risk parity and absolute return. The allocation also includes -17% for financing.
PennPSERS spokeswoman Evelyn Williams could not be immediately reached for additional comment.