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Tuesday, February 17, 2015

PSPRS investment returns through December 2014

The following table shows PSPRS' investment returns, gross of fees*, versus the Russell 3000 for December 2014, the halfway point of the current fiscal year, with the June 2014 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%

7/31/2014 -0.67% -0.67% -1.97% -1.97%
8/31/2014 1.73% 1.05% 4.20% 2.14%
9/30/2014 -1.53% -0.49% -2.08% 0.01%
10/31/2014 0.40% -0.09% 2.75% 2.76%
11/30/2014 0.92% 0.82% 2.42% 5.25%
12/31/2014 -0.18% 0.64% 0.00% 5.25%

There is usually about a two-month lag in PSPRS reporting its investment returns.  2014 ended with no montly change in the Russell 3000 and a slight loss for PSPRS.  PSPRS' total returns were once again brought down by its non-US equity portfolio, which decreased 3.02% in December 2014.  The non-US equity portfolio has an 8.35% loss in the current fiscal year versus a 4.30% gain in the US equity portfolio.  The real assets portfolio has suffered a 3.22% loss for the current fiscal year and is the only other asset class with a loss for the current fiscal year.

PSPRS' monthly return for January 2015 is likely to be quite poor.  The Russell 3000 shows a 2.78% loss  for the month of January 2015, though February 2015 has been so far been a great month.  The Russell 3000 is currently higher than it was on December 31, 2014, but the markets have been so volatile lately that guessing where February will end is a fool's errand.  Regardless, PSPRS is likely to end the month of February 2015 with a fiscal year-to-date return of less than one percent with only four months to reach its expected rate of return of 7.85% by June 30, 2015.

* Returns, gross of fees, are used because PSPRS usually does not report returns, net of fees, except on the final report of the fiscal year.  The past two years fees have reduced the final annual reported return by about one-half of a percent.


  1. Why do you think PSPRS is always under-performing as compared to the Russell 3000?

    1. Thank you for your comment. Within the last few years PSPRS has instituted a more balanced investment strategy. As you are probably aware, risk follows return, so in order to get higher returns you must take more risk. For PSPRS, investing heavily in domestic equities could provide higher returns, but it would also expose them to a lot more risk if the markets head south.

      The type of risk they are now trying to avoid was seen during the dot.com bust and the 08-09 financial crisis. Right now, US markets are outperforming the rest of the world, but if they tank again, we will really get to see if PSPRS' current investment strategy works. You can see by the July and September 2014 returns that PSPRS' returns, while negative, were not as bad as the Russell 3000's, so the strategy appears to be working as planned: potential gains are foregone in order to reduce risk. This means that PSPRS' positive returns will lag the Russell 3000's positive returns, but they will not be as bad as the Russell 3000's negative returns. However, it is way too early to tell how this will play out long term.

      For me the more depressing thing is that if PSPRS stands at 1.0% year-to-date return at the end of February, my calculations show that they will have to average about 1.65% each month for the four remaining months of the fiscal year just to reach the expected rate of return of 7.85%. This compares to earning a monthly average of only 0.64% over the 12-months of the fiscal year. Thank you again for your comment.

    2. Thanks, very informative.


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