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Pension Funds

Ohio Public Employees lowers return assumption to 7.2%

Ohio Public Employees' Retirement System, Columbus, is lowering its actuarially assumed rate of return for its defined benefit plan to 7.2% from 7.5%, spokesman Michael Pramik said in an email.

The board of the $101.4 billion retirement system, which includes $85 billion in defined benefit plan assets, approved the change at its meeting on Wednesday, citing "declining market expectations," a news release said.

The change is effective for the 2018 calendar year valuation. The news release noted the change comes as a result of worsening market expectations since the retirement system's most recent five-year experience study in 2016, when the actuarially assumed rate of return was lowered to 7.5% from 8%.

The news release also noted the current liabilities to retirees totals $117 billion, which includes both the DB and health-care plans, and 60% of those liabilities will be payable to retirees within the next 10 to 15 years.

"We are long-term investors, but investment returns over the next 10 to 15 years are very important to our plan," said Karen Carraher, executive director, in the news release.

OPERS also reduced the actuarially assumed rate of return for its $12.5 billion health-care fund to 6% from 6.5%.

As of March 31, the actual allocation of the DB plan was: 29.5% alternatives; 21.7% each, domestic equities and fixed income; 18.8% international equities, 5.3% risk parity, 1.9% global tactical asset allocation, 1% commodities and 0.1% opportunistic strategies.