Arkansas Teacher Retirement System reported an 11.4% net investment gain for its fiscal year ended June 30, lifting the value of its portfolio assets to $22.4 billion.
The Little Rock-based public pension system’s latest annual gain trailed its custom benchmark’s 15.3% advance by roughly 3.9 percentage points.
That gap reflects the fund’s practice of benchmarking its private equity returns against a U.S. equity benchmark, plus two percentage points “to reflect higher expected returns from illiquidity and complexity” over the long term, Katie Comstock, a consultant with Arkansas Teacher consultant Aon Investments USA, told the board at a Sept. 30 meeting.
A 19.5% gain for the fund’s $12.6 billion in publicly traded equities slightly trailed a 20.1% return for the fund’s policy benchmark.
Comstock noted that an overweight position in small cap equities proved a headwind, in a period where large-cap continued to dominate market gains. But that drag on performance was partly offset by a relative overweight to U.S. equities for a year where gains for domestic stocks once again outpaced non-U.S. stocks.
Arkansas Teachers had allocations of 56.1% to equities as of June 30, a whisker below its 56.2% target.
Broader asset allocations ended the latest fiscal year close to the fund’s policy targets. The only deviations exceeding those targets by more than one percentage point pertained to private equity, with a 13.4% weighting topping the fund’s 12% target, and fixed income, with its 13.1% weighting trailing the fund’s 15% target.
Allocations in line with the fund’s targets included its 11.7% in real assets, and 5.1% in opportunistic/alternatives.
The fund, meanwhile, reported 60 basis points of the portfolio in cash, above its target weighting of 0.
For the prior fiscal year ended June 30, 2023, Arkansas Teacher’s reported a net investment gain of 9.2%, lifting the value of its investment portfolio to $20.75 billion.
