Transcript Plan Statistics Defined Benefit Plan

Welcome to PSPRS
Version Date : 08-01-2014
1
Public Safety Personnel Retirement System
Corrections Officer Retirement Plan
Elected Officials’ Retirement Plan
Fiscal Year 2013 Financial Report
as of June 30, 2013
Some preliminary updates as of June 30, 2014
Version Date : 08-01-2014
2
Total Plan Statistics
Defined Benefit Plan
Active Members
Terminated Vested Members
Drop
33,855
3,065
1,482
Retired
Normal
Beneficiaries
Disability
15,026
11,450
2,036
1,540
Total Participants
53,428
Version Date : 08-01-2014
3
Total PSPRS Statistics
Defined Benefit Plan
Active Members
Terminated Vested Members
Drop
18,436
1,442
1,482
Retired
Normal
Beneficiaries
Disability
10,159
7,444
1,305
1,410
Total Participants
31,519
Version Date : 08-01-2014
4
Total CORP Statistics
Defined Benefit Plan
Active Members
Terminated Vested Members
Retired
Normal
Beneficiaries
Disability
14,580
1,463
3,810
3,164
531
115
Total Participants
19,853
Version Date : 08-01-2014
5
Total EORP Statistics
Defined Benefit Plan
Active Members
Terminated Vested Members
839
160
Retired
Normal
Beneficiaries
Disability
1,057
842
200
15
Total Participants
2,056
Version Date : 08-01-2014
6
Total Plan Statistics
Defined Benefit Plan
Non-Retired
Active Members
Terminated Vested Members
DROP
Total Non-Retired Members
Total
Plans
33,855
3,065
1,482
38,402
PSPRS
18,436
1,442
1,482
21,360
CORP
14,580
1,463
0
16,043
EORP
839
160
0
999
Retired
Normal
Beneficiaries
Disability
Total Retired Members
11,450
2,036
1,540
15,026
7,444
1,305
1,410
10,159
3,164
531
115
3,810
842
200
15
1,057
Total Participants
53,428
31,519
19,853
2,056
Percentage Retired
28.1%
32.2%
19.2%
51.4%
Version Date : 08-01-2014
7
Total Revenue
June 30, 2013
800,000,000
Net Investment Income
710,984,868
700,000,000
600,000,000
500,000,000
ER Contributions
461,681,695
400,000,000
300,000,000
Employee Contributions
185,712,059
200,000,000
100,000,000
0
Court Fees
Alternative
Contributions 2,462,274 8,411,739
Service Purchase &
Transfers 8,819,650
Total Revenue $1,390,349,335
Version Date : 08-01-2014
8
Total Revenue
June 30, 2013
Total Plans
PSPRS
CORP
EORP
Net Investment Income
710,984,868
541,980,088
138,267,533
30,737,247
ER Contributions
461,681,695
378,701,291
68,237,242
14,668,848
Alternative Contributions
2,462,274
2,151,786
203,683
106,805
Court Fees
8,411,739
0
0
8,411,739
185,712,059
127,362,618
50,648,775
7,700,666
8,819,650
7,575,489
999,077
245,084
1,377,997,971 1,057,771,272
258,356,310
61,870,389
EE Contributions
Service Purchase & Transfers
Total Revenue
Version Date : 08-01-2014
9
Total Expenses
June 30, 2013
Total Plans
600,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
0
Pension
Benefits
Survivor
Benefits
Disability
Benefits
Deferred
Benefits
Insurance
Benefits
DROP
Benefits
Refunds
Administrative
Expenses
Transfer
Total Expenses $762,306,028
Version Date : 08-01-2014
10
Total Expenses
June 30, 2013
Total Plans
PSPRS
CORP
EORP
Pension Benefits
502,843,893
383,377,255
81,829,318
37,637,320
Survivor Benefits
66,964,337
51,443,297
9,043,592
6,477,448
Disability Benefits
61,150,525
57,486,396
2,306,541
1,357,588
Deferred Benefits
199,579
199,579
0
0
Insurance Benefits
17,114,539
13,383,444
2,829,735
901,360
DROP Benefits
61,847,822
60,213,930
1,633,892
0
Refunds
44,122,985
12,819,713
31,179,499
123,773
Administrative Expenses
6,670,828
5,104,446
1,266,690
299,692
Transfers
1,391,520
514,209
840,629
36,682
762,306,028
584,542,269
130,929,896
46,833,863
Total Expenses
Version Date : 08-01-2014
11
Net Cash Flow
FYE June 30 (thousands)
100,000
50,000
0
-50,000
-100,000
-150,000
-200,000
-250,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
(55,531)
(79,427)
(108,626)
(93,378)
(93,707)
(82,189)
(196,817)
76,010
(8,483)
(75,123)
(174,284) (123,250)
(95,999)
EE-ER Contributions – Benefits Payments and Expenses
Version Date : 08-01-2014
12
Growth of PSPRS
Employers
Membership
250
35,000
30,000
200
25,000
150
20,000
15,000
100
10,000
50
5,000
0
'69
'71
'73
'75
'77
'79
'81
'83
'85
'87
'89
'91
'93
'95
Version Date : 08-01-2014
'97
'99
'01
'03
'05
'07
'09
'11
'13
13
Distribution of Employers by Type
Tribal Police
Tribal Fire
State Agencies
Municipal Police
Municipal Fire
Marshals
Fire Districts
County Sheriffs
County Investigators
0
10
20
30
40
Version Date : 08-01-2014
50
60
70
80
14
Funding Levels
120.0%
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
6/30/2005 6/30/2006 6/30/2007 6/30/2008 6/30/2009 6/30/2010 6/30/2011 6/30/2012 6/30/2013
PSPRS
83.2%
77.6%
66.4%
66.5%
68.2%
65.8%
61.9%
58.6%
57.1%
CORP
101.1%
93.7%
84.6%
86.8%
82.6%
80.3%
73.0%
67.8%
66.9%
EORP
92.3%
89.9%
74.6%
76.6%
71.3%
66.7%
62.1%
58.4%
55.5%
Version Date : 08-01-2014
15
Funding Level Distribution by # of Employers
45
40
35
30
25
20
15
10
5
0
# of ERs
0% - 10%
6
10% - 20% 20% - 30% 30% - 40% 40% - 50% 50% - 60% 60% - 70% 70% - 80% 80% - 90% 90% - 100% >= 100%
2
1
12
25
30
Version Date : 08-01-2014
35
41
25
20
39
16
Funding Level Distribution by # of Employers and
Membership
45
14,000
40
12,000
35
10,000
30
8,000
25
20
6,000
15
4,000
10
2,000
5
0
0% - 10% 10% - 20% 20% - 30% 30% - 40% 40% - 50% 50% - 60% 60% - 70% 70% - 80% 80% - 90%
0
90% 100%
>= 100%
# of ERs
6
2
1
12
25
30
35
41
25
20
39
Membership
39
47
29
903
7,533
13,247
3,953
2,665
1,134
876
1,093
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PSPRS – Aggregate Employer Rates
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
200203
200304
200405
200506
200607
200708
200809
200910
201011
201112
201213
201314
201415
Rate 3.75% 7.66% 10.05% 12.80% 13.83% 16.52% 21.72% 20.77% 20.89% 22.68% 27.18% 30.44% 32.54%
*The aggregate computed contribution rates before application of the statutory minimum
Version Date : 08-01-2014
18
ER Rate Distribution by # Employers
80
70
60
50
40
30
20
10
0
# of ERs
5% - 10%
10% 15%
15% 20%
20% 25%
25% 30%
30% 35%
35% 40%
40% 45%
45% 50%
50% 55%
55% 60%
60% 65%
65% 70%
70% 75%+
8
68
45
35
18
16
18
4
8
4
5
2
3
2
Version Date : 08-01-2014
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ER Rate Distribution by # Employers and Membership
80
12,000
70
10,000
60
8,000
50
40
6,000
30
4,000
20
2,000
10
0
5% 10%
10% 15%
15% 20%
20% 25%
25% 30%
30% 35%
35% 40%
40% 45%
45% 50%
50% 55%
55% 60%
60% 65%
65% 70%
70% 75%+
# of ERs
8
68
45
35
18
16
18
4
8
4
5
2
3
2
Membership
10
2,262
2,774
2,505
2,072
3,822
11,368
195
2,146
1,311
2,552
90
335
77
Version Date : 08-01-2014
-
20
CORP – Aggregate Employer Rates
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2003-04
Rate 3.95%
2004-05
4.07%
2005-06
5.47%
2006-07
4.46%
2007-08
6.72%
2008-09
8.68%
Version Date : 08-01-2014
2009-10
8.38%
2010-11
8.57%
2011-12
9.50%
2012-13
11.31%
2013-14
13.68%
2014-15
14.46%
21
EORP – Employer Rates
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
C&T
13.49% 14.54% 20.54% 18.55% 20.21% 28.00% 26.25% 29.79% 32.99% 36.44% 39.62% 57.49%
S& C
6.00%
7.00% 13.00% 11.00% 12.84% 14.05% 14.25% 17.42% 17.96% 20.87% 25.94% 55.50%
Statutory
23.50%
Version Date : 08-01-2014
22
Total Fund Changing Financial Status (in 000s)
FYE
2000
2001
2002
2003
2004
2005
2005R
2006
2007
2008
2009
2010
2011
2012
2013
Asset Value
$5,294,936
$5,793,886
$5,818,181
$5,946,631
$5,951,310
$6,104,548
$6,104,548
$6,271,480
$6,106,364
$6,650,684
$7,115,572
$7,330,790
$7,629,124
$7,920,930
$8,095,542
Liabilities
$4,169,958
$4,480,132
$5,056,396
$5,746,803
$6,292,029
$7,218,720
$7,109,867
$7,867,623
$8,830,392
$9,507,482
$10,079,935
$10,749,599
$11,964,152
$13,167,303
$13,786,315
Ratio
127.0%
129.3%
115.1%
103.5%
94.6%
84.6%
85.9%
79.7%
69.2%
70.0%
70.6%
68.2%
63.8%
60.2%
58.7%
Market Value*
$5,619,426
$4,688,259
$3,987,905
$4,207,662
$4,682,652
$5,105,869
$5,105,869
$5,554,802
$6,160,387
$5,984,152
$5,030,674
$5,677,168
$6,667,128
$6,658,622
$7,286,591
Ratio
134.8%
104.6%
78.9%
73.2%
74.4%
70.7%
71.8%
70.6%
69.8%
62.9%
49.9%
52.8%
55.7%
50.6%
52.9%
*Market value does not include future benefit increase reserve
Version Date : 08-01-2014
23
PSPRS Changing Financial Status (in 000s)
FYE
2000
2001
2002
2003
2004
2005
2005R
2006
2007
2008
2009
2010
2011
2012
2013
Asset Value
$4,260,168
$4,661,941
$4,684,386
$4,781,377
$4,774,313
$4,886,963
$4,886,963
$4,999,911
$4,829,521
$5,095,645
$5,445,497
$5,591,304
$5,795,945
$6,051,595
$6,185,074
Liabilities
$3,415,157
$3,674,758
$4,144,211
$4,739,613
$5,167,333
$5,951,937
$5,872,736
$6,495,012
$7,268,291
$7,662,779
Ratio
124.7%
126.9%
113.0%
100.9%
92.4%
82.1%
83.2%
77.0%
66.4%
66.5%
Market Value*
$4,516,110
$3,759,164
$3,193,862
$3,364,413
$3,741,116
$4,070,529
$4,070,529
$4,415,684
$4,868,862
$4,519,329
Ratio
132.2%
102.3%
77.1%
71.0%
72.4%
68.4%
69.3%
68.0%
67.0%
59.0%
$7,989,451
$8,491,822
$9,365,261
$10,325,530
$10,823,540
68.2%
65.8%
61.9%
58.6%
57.1%
$3,830,087
$4,310,574
$5,048,313
$5,074,688
$5,557,274
47.9%
50.8%
53.9%
49.1%
51.3%
*Market value does not include future benefit increase reserve
Version Date : 08-01-2014
24
CORP Changing Financial Status (in 000s)
2001
$776,177
$554,387
140.0%
$637,372
115.0%
2002
$782,446
$632,238
123.8%
$551,876
87.3%
2003
$811,791
$709,298
114.4%
$592,230
83.5%
2004
$833,621
$795,775
104.8%
$673,322
84.6%
2005
$872,981
$906,025
96.4%
$747,458
82.5%
2005R
$872,981
$863,790
101.1%
$747,458
86.5%
2006
$919,868
$981,208
93.7%
$828,490
84.4%
2007
$940,126
$1,110,801
84.6%
$952,511
85.7%
2008
$1,207,026
$1,390,363
86.8%
$1,100,943
79.2%
2009
$1,309,124
$1,584,293
82.6%
$945,891
59.7%
2010
$1,382,144
$1,722,006
80.3%
$1,094,055
63.5%
2011
$1,466,750
$2,008,569
73.0%
$1,303,798
64.9%
2012
$1,512,989
$2,231,544
67.8%
$1,286,979
57.7%
2013
$1,559,583
$2,330,238
66.9%
$1,416,800
60.8%
*Market value does not include future benefit increase reserve
Version Date : 08-01-2014
25
EORP Changing Financial Status (in 000s)
FYE
2000
2001
2002
2003
2004
2005
2005R
2006
2007
2008
2009
2010
2011
2012
Asset Value
$329,777
$355,768
$351,349
$353,463
$343,376
$344,604
$344,604
$351,701
$336,717
$348,013
$360,950
$357,342
$366,429
$356,346
Liabilities
$253,478
$250,987
$279,947
$297,892
$328,921
$360,758
$373,341
$391,403
$451,299
$454,341
$506,191
$535,771
$590,322
$610,229
Ratio
130.1%
141.7%
125.5%
118.7%
104.4%
95.5%
92.3%
89.9%
74.6%
76.6%
71.3%
66.7%
62.1%
58.4%
Market Value*
$355,335
$291,723
$242,167
$251,019
$268,214
$287,882
$287,882
$310,629
$339,013
$313,881
$254,695
$272,539
$315,017
$296,955
Ratio
140.2%
116.2%
86.5%
84.3%
81.5%
79.8%
77.1%
79.4%
75.1%
69.1%
50.3%
50.9%
53.4%
48.7%
2013
$350,885
$632,537
55.5%
$312,517
49.4%
*Market value does not include future benefit increase reserve
Version Date : 08-01-2014
26
Legislative update 2014




HB 2122 EORP Defined Contribution Plan
HB 2166 Surviving spouse; Health Insurance
subsidies
HB 2693 PSPRS: Employer Liability; Death
Benefits
SB1284 Peace officers; Omnibus
Version Date : 08-01-2014
27
Questions?
Version Date : 08-01-2014
28
Total Fund Rates of Return FY’13
7/31/2012
8/31/2012
9/30/2012
10/31/2012
11/30/2012
12/31/2012
1/31/2013
2/28/2013
3/31/2013
4/30/2013
5/31/2013
6/30/2013
Net of Fees
PSPRS Trust
Month FYTD
Target Benchmark
Benchmark
Month FYTD
0.86%
1.43%
1.35%
-0.19%
1.16%
1.27%
1.92%
0.26%
2.04%
1.14%
0.53%
-1.12%
1.02%
1.42%
1.77%
-0.21%
0.68%
1.04%
2.24%
0.30%
1.28%
1.43%
-0.03%
-1.24%
0.86%
2.30%
3.68%
3.49%
4.69%
6.02%
8.05%
8.33%
10.54%
11.80%
12.40%
11.14%
10.64% *
Version Date : 08-01-2014
1.02%
2.45%
4.27%
4.05%
4.76%
5.85%
8.22%
8.54%
9.93%
11.50%
11.47%
10.09%
29
Total Fund Rates of Return FY’14
(Gross of fees) (Performance for the Fiscal Year is Preliminary and unaudited)
PSPRS Trust
Month FYTD
7/31/2013
8/31/2013
9/30/2013
10/31/2013
11/30/2013
12/31/2013
1/31/2014
2/28/2014
3/31/2014
4/30/2014
5/31/2014
6/30/2014
1.9%
0.0%
2.0%
2.4%
0.5%
0.6%
-1.1%
2.4%
1.2%
0.3%
2.0%
0.8%
1.9%
1.9%
3.9%
6.4%
7.0%
7.7%
6.5%
9.1%
10.4%
10.7%
12.9%
13.8%
Benchmark
Month
FYTD
2.6%
-0.9%
2.6%
2.1%
0.9%
1.0%
-1.2%
2.5%
0.4%
0.6%
1.2%
1.3%
2.6%
1.7%
4.3%
6.4%
7.4%
8.5%
7.2%
10.0%
10.4%
11.0%
12.3%
13.8%
83% of the past 30 months have been positive return months.
Version Date : 08-01-2014
30
Asset Allocation
May 31, 2014
Total Fund $8,069,791,295
Risk Parity Short Term
Investments
3.3%
4.6%
U.S. Equity
15.5%
Real Estate
11.6%
Real Assets
5.8%
Non-U.S. Equity
14.2%
GTAA
9.1%
Credit Opportunities
9.3%
Fixed Income
9.5%
Private Equity
13.3%
Absolute Return
3.8%
Version Date : 08-01-2014
31
PSPRS History*
•
•
Extraordinary losses during tech bubble collapse of 2000-2001 lead to sweeping change.
Specific, legal authorizations for current plan in place by 2008.
Three step process implemented over seven years under a unified board of trustees.*
•
Hiring of appropriate consultants (at cost of 0.01% to 0.02% of NAV / year):
•
•
•
•
•
•
•
Legislative authorization:
•
•
•
•
Fiduciary consultant, asset allocation: New England Pension Consultants (NEPC).
Specialty consultant ,credit opportunities: NEPC.
Specialty consultant, private equity: Stepstone and Albourne Partners.
Specialty consultant, “hedge funds”: Albourne Partners.
Specialty consultant, real estate: ORG Portfolio Management.
Fiduciary legal advisor: Kutak Rock, LLP.
Implementing sound advice proved a major roadblock requiring dedicated efforts.
“Legal list” of statutory limitations on assets which could be held in order to “protect” the system ->
actually contributed to losses.
Long “do not do” list was accompanied by extraordinary, concentrated risk taking powers.
Adequate staff (6-10 professionals at cost 0.01% to 0.02% of NAV/year) and governance.
•
•
•
Process advice of consultants.
Implement controls such that no one person controlled investments.
Keep board of trustees aware and informed.
* Lieberman, M. and Lundin, M. (2014), “From Sow’s Ear to Silk Purse: Transformation of the Arizona Public Safety Personnel
Retirement System. Benefits Magazine, June, pp. 2-7.
Version Date : 08-01-2014
32
PSPRS History*
•
•
•
•
•
•
Arizona PSPRS: Founded in 1968.
Initially involved itself only in direct investment in US securities; a mix of domestic stocks,
bonds, real estate and cash.
Investment management consisted of active security selection.
In 2007 it made its first international equity investments.
In 2008, assets of the PSPRS Trust were commingled with those of two other pension
systems, all managed by a unitary board of trustees whose mandate was to invest in a broad
variety of assets.
Today: 188 separate mandates with 111 different general partners.
* Lieberman, M. and Lundin, M. (2014), “From Sow’s Ear to Silk Purse: Transformation of the Arizona Public Safety Personnel
Retirement System. Benefits Magazine, June, pp. 2-7.
Currently at 12 asset classes (depending on how you count them)
As of June, 2014, Arizona PSPRS Trust controlled $8.1 billion in assets
under management and asset classes included:
•
•
•
•
•
•
Public Equity (US listed stocks since inception).
US Fixed Income (US securities since inception).
Cash (Since inception).
Real Estate (US real estate introduced in 1992).
Non-US based Equity (Introduced July of 2007).
Private Equity (Introduced in July, 2008).
•
•
•
•
•
•
Credit Opportunities (Introduced in July, 2008).
Real Assets (Introduced in April, 2009).
Global Tactical Asset Allocation (Introduced in March, 2010).
Non-US based fixed income (Introduced in November, 2010).
Absolute Return (Introduced in November, 2010).
Risk Parity (Introduced in July, 2012).
Figure Source: New England Pension Consultants (NEPC)
2014.
Arizona PSPRS results of diversification
•
PSPRS risk evolution since diversification program began:
•
•
•
•
•
•
Average yearly PSPRS Mahalanobis distance (white circles, left scale) reported by calendar year.
Average yearly 60/35/5 portfolio Mahalanobis distance (white squares, left scale).
Ratio of PSPRS Trust to 60/35/5 Mahalanobis distances (darkened triangles, right scale).
2003 to 2007: Ratio indicates that the PSPRS Trust portfolio was 2.4 times riskier than
the 60/35/5 portfolio.
2008 to 2013: PSPRS Trust portfolio is 0.51 times less risky than the 60/35/5 portfolio.
In seven years, the PSPRS Trust has become 4.7 times less risk than it was historically.
PSPRS performance documented
in Journal of Asset Management,
August, 2014
For further discussion and other results:
• Anderson M., et al. (2014), “Modern
Pension Fund Diversification”, Journal
of Asset Management, August.
• A pre-print copy can also be obtained
at www.ssrn.com
• We have observed and documented a
dramatic decrease in risk (> x4).
• -But is the portfolio more efficient?
Total Fund Performance and Efficiency
As of March 31, 2014
One Year Three Year Five Year
PSPRS Return
Risk (%/ year)
Sharpe Ratio (Risk-Adjusted Return)
(% / year)
11.3%
7.3%
13.1%
Peer Ranking*
57/100
88/100
77/100
(% / year)
5.2%
7.2%
Peer Ranking*
4/100
9/100
1.4
1.8
10/100
14/100
Value
Peer Ranking*
* Peer Rankings are percentiles based on a sample of 55 defined benefit public trusts over $1 billion. Source: NEPC.
The Sharpe ratio is estimated as portfolio return, above the risk free interest rate, divided by the standard deviation of
those returns, or the risk encountered in order to achieve those returns. Risk-adjusted performance measurement is
gauge of portfolio efficiency: The return achieved for risk accepted or the risk endured in order to reach a performance
level. Figures as of end Q1, 2014. Fund returns are gross of fees.
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37
Total Fund Performance and Efficiency
As of March 31, 2014
One Year Three Year Five Year
PSPRS Return
Risk (%/ year)
Sharpe Ratio (Risk-Adjusted Return)
(% / year)
11.3%
7.3%
13.1%
Peer Ranking*
57/100
88/100
77/100
(% / year)
5.2%
7.2%
Peer Ranking*
4/100
9/100
1.4
1.8
10/100
14/100
Value
Peer Ranking*
Risk-adjusted performance, as gauged through the Sharpe ratio, is perhaps most common
form of portfolio efficiency measurement. Measurement.
* Peer Rankings are percentiles based on a sample of 55 defined benefit public trusts over $1 billion. Source: NEPC.
The Sharpe ratio is estimated as portfolio return, above the risk free interest rate, divided by the standard deviation of
those returns, or the risk encountered in order to achieve those returns. Risk-adjusted performance measurement is
gauge of portfolio efficiency: The return achieved for risk accepted or the risk endured in order to reach a performance
level. Figures as of end Q1, 2014. Fund returns are gross of fees.
Version Date : 08-01-2014
38
1.8
100
1.6
90
1.4
80
70
1.2
60
1
50
0.8
40
0.6
30
0.4
20
0.2
10
0
Percentile Ranking
Sharpe Ratio
PSPRS Risk-adjusted return relative to the peer groups
0
PSPRS Sharpe Ratio (rolling 3 year)
PSPRS Ranking Among Peers
• In risk-adjusted terms (gauged by the Sharpe Ratio), PSPRS is in the top 6%
of US Public Trusts with AUM > $1 billion.
• PSPRS has been a top decile performer in term of risk-adjusted return for five
straight quarters; since March of 2013.
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Thank you for attending
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40