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Monday, October 31, 2016

PSPRS investment returns through August 2016

The following table shows PSPRS' investment returns, gross of fees*, versus the Russell 3000 through August 2016, the second month of the current fiscal year (FY), with the FY end 2014, 2015, and 2016 returns included for comparison:

Report PSPRS PSPRS Russell 3000 Russell 3000
Date Month End Fiscal YTD Month End Fiscal YTD
6/30/2014 0.78% 13.82% 2.51% 25.22%
6/30/2015 -0.73% 4.21% -1.67% 7.29%
6/30/2016 -0.32% 1.06% 0.21% 2.14%

7/31/2016 1.62% 1.62% 3.97% 3.97%
8/30/2016 1.76% 3.40% 0.26% 4.23%

There is usually about a two-month lag in PSPRS reporting its investment returns.

PSPRS followed up a good July with a good August.  PSPRS had positive monthly returns in all but one of its ten asset classes with only the risk parity class slightly negative, and year-to-date all ten asset classes have positive returns.  Private equity earned an incredible monthly return of 7.51%.  Private equity (PE) assets tend to be very illiquid and difficult to value since they do not trade on open markets, so does such a large monthly gain mean that some PE investment was sold or taken public at a large profit?  Hopefully, there is something tangible behind the large return, and not just paper gains reported to PSPRS by the PE firms with which it invests.

September looked to be a wash for the Russell 3000, and as of October 28, 2016, the penultimate trading day of this month, it has a monthly loss of 2.22%.  It will be interesting to see if PSPRS can keep up its winning streak for the current fiscal year.  PSPRS' next Board of Trustees meeting will be on November 16, 2016.  Next month we should also expect to see the release of actuarial reports by employer, which will include the scariest thing we see all year: the contribution rates for the next fiscal year.  Have a safe Halloween.

 * Returns, gross of fees, are used because PSPRS usually does not report returns, net of fees paid to outside agencies, except on the final report of the fiscal year.  Returns, gross of fees, are used in the table for consistency.  The past two years fees have reduced the final annual reported return by about a half percent.  Returns, net of fees, were 13.28% in FY 2014, 3.68% in FY 2015, and 0.63% in FY 2016.