OPERS investments returned 13.9 percent in 2013

The Ohio Public Employees Retirement System earned 13.9 percent on its investments last year, boosting its overall portfolio to a record $88.6 billion, surpassing the $83.6 billion reached in 2007.

The return achieved in 2013 is among the top 10 annual investment returns in OPERS’ history.

The unaudited results indicate that OPERS’ Defined Benefit Fund returned 14.38 percent, and the Health Care Fund increased 11.37 percent, each beating projected benchmarks. The results are net of fees.

The $74.7 billion Defined Benefit Fund returns were led by equities, which account for 43.5 percent of the portfolio. Fund highlights:

  • U.S. equities increased 33.72 percent to $15.9 billion.
  • Non-U.S. equities returned 15.27 percent, finishing the year at $16.6 billion.
  • The three main alternatives investments had positive returns. Private equity returned 16.3 percent, real estate increased 15.2 percent, and hedge funds gained 9.1 percent.
  • Core fixed income investments, which make up less than 9 percent of the defined benefit portfolio, declined 1 percent, with other debt instruments showing mixed results.

The OPERS Health Care Fund, which totals $13 billion, had a similar pattern of performance. The Defined Contribution Fund ended the year at $885 million.

“The strong performance of our investments in 2013 illustrates the professional, prudent manner in which the OPERS pension and health-care portfolios are managed,” said OPERS Executive Director Karen Carraher. “One of our goals is to earn an average return of 8 percent over the long term. These strong returns surpass that goal, and allow us to continue to be well-funded.”

Carraher said last year’s investment performance, coupled with changes in pension law passed by the Ohio General Assembly and changes OPERS made in its health care program, combined to improve OPERS’ overall fiscal strength.

The funding level of the defined benefit plan compares its assets to its liabilities. Funded levels of 80 percent or higher are considered healthy. As of Dec. 31, OPERS’ funding ratio was 81 percent.

Two-thirds of OPERS’ annual income is derived from its investments. We count on these returns, achieved by a professional staff with decades of experience, to pay benefits and help maintain meaningful health care coverage for members. Our staff manages about $35 billion in OPERS funds.

“OPERS invests for the long-term,” said OPERS Chief Investment Officer John Lane. “This investment strategy allows the fund to weather market highs and lows by maintaining a disciplined approach and a diversified portfolio spread over several asset classes. This disciplined approach allows us to prepare for the future retirement of our members, and supports our existing retirees.”

OPERS also supports many businesses within the state. Since 2010, we’ve committed more than $2.4 billion to Ohio investments or Ohio-based money managers. Ohio-qualified managers not headquartered here oversee more than $6.4 billion of our assets.

This entry was posted in Benefits, DB plans, Health Care, Investments, Pension Reform, Pensions and tagged , , , , , . Bookmark the permalink.

34 Responses to OPERS investments returned 13.9 percent in 2013

  1. D. White says:

    If the Health Care Fund continues to exceed benchmark investment returns, will OPERS revisit the benefits provides to members, particularly the exclusion of purchased service from health care eligibility?

  2. Dennis M. Coble says:

    THANK YOU FOR BEING THERE FOR THE MEMBERS!

  3. Tom Quade says:

    Since we have done so well, why not hold off the removal of spouses from coverage and the increase in cost sharing for another year….doesn’t change any long term plans, but just buys those facing horrible coverage costs and choices for another year…..

  4. David Jones says:

    Looking at the 2012 CAFR on page 37, the 2013 starting balance for the Defined Benefit Fund would be $67.7 billion. A 14.38% gain would put the reserves at $77.4 billion, not $74.7 billion. Are you using a different basel or did someone transpose a couple digits?

    • Michael Pramik says:

      David,

      The figure on page 37 of the 2012 CAFR is the total fund balance, not the investment portfolio balance. Our defined benefit investment portfolio increased during 2013 from $67.1 billion to $74.7 billion. On a cash flow-adjusted basis, we earned 14.38 percent for the year.

      –Ohio PERS

  5. Pat Rizzi says:

    I see you are engaged in censorship now. Our comments are now being screened? I do wish you would reconsider your stance on health care for our spouses. I also planned for the long term when I planned our retirement and that plan included health care for my spouse. Why can’t you grandfather those of us who ere retired before you changed the rules?

    • Michael Pramik says:

      Pat,

      We have always reviewed all comments, since the blog was first published in March 2011. Please read our Comments Policy.

      –Ohio PERS

    • Pat Rizzi says:

      And as I said I also planned for my retirement and that plan included health care coverage for my spouse. I wish you would grand father those of us who retired before the rules were changed.

      • Barb HANKENHOF says:

        I agree w Pat Rizzi. I also planned for my long term retirement based on the rules at that time. I think the moral and right thing to do would be to grandfather those who had retired under the old rules.

  6. Cheryl says:

    I am very happy that the Ohio Public Employees Retirement System earned 13.9 percent on its investments last year, boosting its overall portfolio to a record $88.6 billion, surpassing the $83.6 billion reached in 2007. If this earning rate continues, I hope the OPERS Board will consider re-establishing some benefits that have been taken away from its retirees, those about to retire and those who still pay into the OPERS system.

    • Davi says:

      You know the old saying, once they’er gone, they are always gone. look at the bright side as Karen Carraher stated this was approved by OPERS members (I can’t find them but she says their here)

  7. Davi Darfus says:

    I would love to have access to 13.9% on investments, why not allow members that opportunity? We could boost the fund much higher while investing in our own financial futures.

  8. JA says:

    Looking forward, I wish that somehow we could keep the leverage/clout of being part of the OPERS retirees group when we purchase our health insurance supplement or advantage plans. I am concerned that when I take my allowance — and I am grateful for that allowance — that I will buy what is best for me in my present situation (probably a Medicare supplement plan, for which I will no doubt pay more) but that I will have no group “safety?” In other words, I will be insured all by myself and will lose — some group “safety?”

    Also — I am glad you did well, too……I would like to say again that it is unjust for those of us who paid into SS for over 10 years to be forced to forfeit 2/3 of that money….Of course I don’t think I should have added the ten years added to my 20.+ in OPERS system, but I will never agree with having lost out twice. I thought I planned wisely for retirement. But when you look at it, I did nothing right in my retirement planning. The OPERS rules changed. Unless retirees have 30 years in, they pay for health care. Of course this is fair to those who did 30 years, but the rules changed. I was already retired. The SS rules did not…..at least not in recent times.

    • Michael Pramik says:

      JA,

      As we have said in the past, Social Security made the rules on the Windfall Elimination Provision and Government Pension Offset. We are not in favor of these provisions, but we are concentrating our efforts on making sure Ohio remains a non-Social Security state.

      –Ohio PERS

  9. Ben Grabill says:

    Thank you for the excellent investment returns for 2013. It is a long term advantage for all us retiree’s and members whose income for our living comes from OPERS.

    If the Health Care fund continues to improve, I hope OPERS will reconsider the elimination of the Medicare Part B reimbursement. Many of us have come to rely on that monthly reimbursement in our benefit.

    Thank you.

    • Michael Pramik says:

      Ben,

      OPERS does not make major decisions like that based on a single year of investment returns. We address that topic in today’s blog:

      http://perspective.opers.org/benefits/steady-course-best-for-pension-systems/#more-1893

      –Ohio PERS

      • Cheryl says:

        Would you please go back to a published write-up dated August 16, 2011 — “OPERS Posted Positive Returns 31 or the Past 39 Years”. I don’t think any of us expect OPERS to base everything regarding our benefits on just one year, but after all, OPERS has posted positive returns for many, many years.

        • Michael Pramik says:

          Cheryl,

          The annualized return of 8 percent over a long period is what we need to maintain our system. Awarding added benefits during good economic times is one sure way to hurt the system when there is the natural downturn in the economy.

          –Ohio PERS

          • Cheryl says:

            I believe we are all asking the OPERS Board to reconsider reinstating benefits that have been taken away recently; we are not asking the Board to consider awarding new or added benefits.

  10. Dwight says:

    Perhaps it’s time we contact our legislators and request they consider rolling back some of the overzealous cuts that were included in the OAC revisions signed last January 7th.

    • Michael Pramik says:

      Dwight,

      Here are reasons that we do not make changes based on one year of investment returns:

      http://perspective.opers.org/benefits/steady-course-best-for-pension-systems/#more-1893

      –Ohio PERS

      • Dwight says:

        Of course – I totally agree; changes should not be based on short term returns . . . or losses. Yet, it seems that’s exactly what happened when the world experienced a relatively short term market correction (well deserved, in my opinion). Again, I believe it’s time to contact our state representatives.

        • Michael Pramik says:

          Dwight,

          We have said repeatedly that demographic changes, longer life spans and ever-rising health care costs contributed greatly to the changes that came about in 2012. Plus, the Great Recession was much more than a relatively short term “correction.”

          –Ohio PERS

  11. julie says:

    maybe opers should put spouse coverage to a vote by the members,after all its our money and you do work for us members.if the market takes a dive again then cuts could be revisited again only going forward like other systems did and not buden those who have already retired. just a thought thank-you

  12. sheilah says:

    Thank God I do appreciate your hard work and diligence in helping to ensure our hard worked pension benefits.

  13. gilbert scherer says:

    Since OPERS is doing so well on its investments, it might seem prudent to scale back the proposed health care changes that would greatly impact pensioners. For example, the Part B reimbursement phase out could be cancelled and this benefit continue as it is now .

  14. Pingback: Steady course best for pension systems | PERSpective

  15. I agree with most of the people who have posted here. I had a great deal of confidence in PERS until I learned much more about the WEP and GPO offsets. The really sad fact is that PERS did know about what was ahead for us esp. when I retired in 2000, it is on our video, but I was 6 months away from retirement. I would have made completely different plans had I known that an offset of 50% awaited me when I retired. We were not told by either social security nor by PERS. That to me is very very unsettling. For those of us who worked under 2 systems, it just didn’t make any sense to withhold this information. It was too late by then to make other plans for retirement once we knew about these reductions (offsets). What say you?? Now we are having the benefits we did receive slowly taken from us with the offsets still reducing our benefits – this is a double whammy.

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