Thursday, October 11, 2018

The Teachers Retirement System of Illinois Rate of Investment Return for 2018 and TRS FY 2018 Cash Flow Summary

Published date from TRS: September 18, 2018

SPRINGFIELD, IL – Teachers’ Retirement System investments generated a positive 8.45 percent rate of return, net of fees, during fiscal year 2018 – a return that exceeded the System’s custom investment benchmark of 8.19 percent.
TRS ended FY 2018 on June 30 with $51.5 billion in assets, an increase of 4.2 percent during the year. Gross of fees, the TRS return for FY 2018 was 9.17 percent. TRS long-term investment returns continue to exceed the System’s goal of 7 percent. For FY 2018, the 30-year net of fees return was 8.4 percent; and 9.2 percent for 40 years.
“TRS continues to earn better-than-expected returns on its investments using a diversified strategy that carries less risk than most of our peer systems’ investments,” said TRS Executive Director Dick Ingram. “That’s good news for our members because the financial challenges TRS faces now and in the future require us to balance two critical mandates: Do everything we can to safeguard our members’ money while prudently maximizing investment revenue.
“Because state government has failed to adequately fund TRS for the last 80 years, the system only has 40 cents in the bank for every $1 we owe each of our members,” Ingram added. “Risk management is critical because every dime is important. We know we can’t invest our way out of our funding shortfall. Our future sustainability relies on consistent and adequate state funding to pay down this debt.”
Ingram stressed that the 30-year and 40-year rate-of-returns are the most important numbers in the FY 2018 investment data. These time frames not only reflect the long-term relationship that TRS has with its members but indicate a successful investment program that values steady growth and strong risk management over several generations.
In the last 10 years, TRS investments have recorded positive returns in nine years with one year of negative returns realized during the worldwide financial crisis of 2009. All returns in this chart are net of fees.

Fiscal Year:
2018    +8.45%
2017    +12.6%
2016    +0.01%
2015    +4.0%
2014    +17.4%
2013    +12.8%
2012    +0.76%
2011    +23.6%
2010    +12.8%
2009    -22.7%

The Teachers Retirement System of Illinois 

TRS FY 2018 Cash Flow Summary (from Bob Lyons):

TRS FY 2018 Cash Flow Summary Beginning Balance (July 1, 2017): $49.400 billion
State Appropriation for FY 2018:  $4.164 billion
Teacher/Employer Contribution: $1.036 billion                                                                                                                         
Total Contributions to TRS: $5.200 billion                                                                                                                                                                                                                     
Total Annuity Benefits: $6.555 billion                                                                                                                                                                                            
Cost of Running TRS: $.023 billion
TRS Total Outflow: $6.578 billion

The Part of TRS Profit that Makes Up the Difference: $1.378 billion

The Part of TRS Profit That Is Left To Be Invested: $1.905 billion

Ending Balance (June 30, 2018): $51.300 billion

State Appropriation for FY 2019: $4.466 billion                                                

Note: TRS needs to make almost $1.4 billion in investments just to break even for the year; though TRS is making more than 8% for the year, the TRS unfunded liability increased in FY 2018.

In 2018, the TRS fund made 8.45% net of fees, but because the cost of benefits exceeds contributions by $1.383 billion, the TRS fund only increased by $1.9 billion (or 4.2%).

For FY 2018, the 30-year net of fees return was 8.4%, and the 40-year return was 9.2%.

Due to state under funding last year, the TRS unfunded liability grew by 2.8% from $71.4 billion to $73.4 billion. The TRS funded status by Bob Lyons’ calculation is 41.14%. It was 40.2% in FT 2017. 

1 comment:

  1. "The Teachers’ Retirement System of the State of Illinois is the 28th largest public pension system in the United States, and provides retirement, disability and survivor benefits to teachers, administrators and other public school personnel employed outside of Chicago. The System serves 412,500 members and had assets of $51.5 billion as of June 30, 2018."