Retiree system's return is 2.62%

Public-employee fund nears $8B

The Arkansas Public Employees Retirement System's investments increased in value by $149 million in the past quarter to $7.81 billion, an investment consultant told the system's board of trustees Wednesday.

The system's investment return was 2.62 percent in the quarter that ended March 31 and ranked among the top 25 percent of the nation's public pension systems, Brianne Weymouth, vice president of the Chicago-based investment consultant Callan Associates Inc.

The system's investments increased in value to $7.85 billion through the end of April, system Executive Director Gail Stone said after the trustees' meeting.

The public employees retirement system is state government's second-largest retirement system with more than 75,000 working and retired members.

The system's investments include about $275 million managed for the Arkansas State Police Retirement System, Stone said.

The Arkansas Teacher Retirement System is state government's largest retirement system with more than $14 billion in investments and more than 100,000 working and retired members.

The public employees' investment return was 6.4 percent in the year that ended March 31. It has averaged 10.93 percent a year during the past three years, 10.50 percent a year over the past five years and 6.81 percent a year over the past seven years, Callan Associates said in a report to the board of trustees.

The system's 6.81 percent a year average investment return over the past seven years ranks among the top 25 percent of public pension systems, Callan said.

During the quarter that ended March 31, the system's foreign stock market investments increased in value by $71 million to $1.93 billion, while its domestic stock market investments increased in value by $30 million to $3.3 billion, Callan Associates said in its report.

Among other investments, the system's bond investments increased by $21 million in value to $1.26 billion last quarter, Callan said.

Last quarter was a good quarter for both stocks and bonds as the nation experienced employment gains amid a "soft" gross domestic product, said Ryan Ball, senior vice president Callan Associates.

The system has taken steps to diversity its portfolio in preparation for interest rate increases expected to be imposed by the Federal Reserve, he said, adding that bond investment managers have the flexibility to prepare for the rate increases.

The trustees decided Wednesday to invite two investment managers of real estate funds -- Chicago-based LaSalle Investment Management and Boston-based TA Realty -- to its Aug. 19 meeting to make presentations about their latest real estate funds.

The system had $32.3 million in the LaSalle Income and Growth VI LP fund and $29.8 million in the TA Realty X fund through March 31, Callan Associates reported. Ball said the system has invested in these funds for three years.

The system includes 45,841 working members with an average annual salary of $35,733, an average age of 44.9 years and average service of 9.3 years, the actuarial firm of Gabriel, Roeder, Smith & Co. of Southfield, Mich., reported in August.

The system also includes 30,112 retired members with an average annual benefit of $13,376 and 1,679 deferred-retirement participants with annual credits of $52.26 million, Gabriel reported.

State and local governments paid $264.8 million into the system in fiscal 2014, while system members chipped in $48.2 million.

The system's unfunded liabilities totaled $1.9 billion as of June 30 with a projected payback period of 23 years, Gabriel said. Unfunded liabilities are the amount by which the system's liabilities exceed an actuarial value of the system's assets. Actuaries often compare unfunded liabilities to mortgages on homes.

Sebastian County Judge David Hudson, appointed by Gov. Asa Hutchinson to replace trustee and former Johnson County Judge Mike Jacobs, told the trustees that he has been impressed with the system's investment success amid turbulent stock markets.

Searcy Mayor David Morris -- whom the nine-member board appointed in February to complete the term of former Malvern Mayor Steve Northcutt on the board -- said he hopes to represent the cities as well as Hudson represents the counties on the board.

The other trustees include state Department of Finance and Administration Director Larry Walther, state Auditor Andrea Lea, state Treasurer Dennis Milligan and former Department of Workforce Services Director Artee Williams as well as Ouida Wright of Conway, Bill Gaddy of Little Rock and Carol Bevis of Little Rock.

Metro on 05/21/2015

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