Oregon Public Employees Retirement Fund sees strong gains

Buoyed by a banner year in stock markets domestically and overseas, the Oregon Public Employees Retirement Fund posted a 15.3 percent gain for the 2017 calendar year and reached a record high year-end balance in December, according to data released Friday.

The global and diversified trust fund, which is managed by the Oregon State Treasury in accordance with policies and allocation targets set by the Oregon Investment Council, closed 2017 with a value of $77.2 billion.

The fund is managed to pay the long-term contractual benefits of more than 350,000 current and former public sector employees. Historically, more than 73 cents of every dollar in benefits comes from investment returns, which means there is less pressure for the money to come from taxpayers or other sources.

“The long-term sustainability of the Oregon investment portfolio matters to every Oregonian,” said Treasurer Tobias Read, who sits on the Oregon Investment Council. “Just as important as the strong returns in 2017 — which are largely a reflection of the broader market — we are in the midst of a management modernization at Treasury that will increase our capacity, reduce costs, and rely less on expensive Wall Street consultants.”

Read applauded the tactical oversight and long-term objectives of the Treasury Investment Division, led by Chief Investment Officer John Skjervem.

The strongest performing part of the portfolio in 2017 was in domestic and international equities, echoing the stock market rally.

The performance of the overall pension fund does not mirror the stock markets exactly, however, because it is diversified – or split up — into different kinds of investments in order to better manage risk and volatility. Oregon also invests in bonds, privately-held companies, real estate, commodities and timberland. The fund realized positive returns across all asset classes in 2017.

The overall performance in 2017 marked the fund’s strongest single-year return since 2013, when the fund gained 15.6 percent.

The fund is invested for a multi-decade horizon to cover the long term obligations for covered retirees. The “assumed rate” for the pension fund is 7.2 percent. This assumed rate, set by the State’s Public Employee Retirement System board, is the average annual investment return the fund is expected to earn over that long-term span.

As of Dec. 31, the pension fund realized a 9.0 percent average annual return for the past 5 years and a 6.0 percent average annual return for the past 10 years, a decade that includes the severe bear market of 2008-09.

The Oregon State Treasury protects public assets, saves money, and helps Oregonians to invest in themselves and their families through empowerment programs. Treasury oversees public investment, banking, debt management services and the Oregon Savings Network, which manages OregonSaves, Oregon ABLE and 529 college savings options. State investment policies are set by the Oregon Investment Council. Treasury also promotes public outreach and education to help Oregonians learn strategies to save money and make smart financial choices.