FRANKFORT, KY – Pension and insurance funds for Kentucky state and local government employees and the State Police saw their investments collectively return about -5.7% net of fees during the fiscal year ended June 30. Pension fund investments for the County Employees Retirement System (CERS) and the Kentucky Employees Retirement System (KERS) Hazardous and Nonhazardous plans, and the State Police Retirement System, returned -5.7% net of fees in Fiscal Year (FY) 2022. The insurance fund return was -5.3% net of fees across all plans.
The investment performance resulted in a fiscal year-end market value of $21.6 billion across all funds as of June 30. That figure represents a $1.1 billion decrease in the market value of pension and insurance assets from June 30, 2021. FY 2021 saw record investment performance across all funds.
Overall, the pension portfolios managed by the Kentucky Public Pensions Authority (KPPA), which comprise all CERS, KERS, and SPRS pension funds, slightly outperformed their benchmark, which returned -5.8% for the fiscal year. Together, the CERS Nonhazardous and Hazardous portfolios returned -5.9% compared with their benchmark’s -6.4%. The KRS pension portfolios – comprising KERS Nonhazardous, Hazardous, and SPRS pensions – returned -5.1%, slightly worse than the benchmark’s -4.8% return.
Most broad market indexes finished the fiscal year with negative returns. In equities, the Russell 3000 fell 13.9%, while in fixed income, the Bloomberg Barclays US Aggregate bond index fell 10.3% for the fiscal year.
Despite the negative overall returns, the pension portfolios managed by KPPA outperformed most of their peers, according to analysis by consultant Wilshire. KPPA also outperformed most of its peers in terms of risk-adjusted returns, or returns per unit of risk, also known as the Sharpe ratio. KPPA considers the Sharpe ratio to be the industry standard for measuring risk-adjusted returns.
“Protecting our systems’ assets is paramount, and with volatile markets that caused many other funds’ performance to be worse than ours, I am pleased in particular with our relative risk-adjusted returns,” said David Eager, KPPA Executive Director.
Steve Willer, KPPA Chief Investment Officer, echoed Eager’s assessment. “In a turbulent and challenging year for markets, we were able to produce strong relative risk-adjusted returns for participants and outperform our benchmark by maintaining our disciplined investment approach,” Willer said. “We are well positioned to take advantage of market opportunities over the coming quarters.”
For more detailed information about FY 2022 returns, including breakouts of individual CERS, KERS, and SPRS funds and asset classes, please visit the Monthly Performance Reports page in the Investments section of KPPA’s website. For further information about individual asset classes, consult the Investment Policy Statement. For more information about KPPA’s investments generally, visit the Investments section of our website.
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The Kentucky Public Pensions Authority is responsible for the investment of funds and administration of pension and health insurance benefits for over 401,000 active and retired state and local government employees, state police officers, and nonteaching staff of local school boards and regional universities.
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https://kyret.ky.gov