The trust funds for state employees and retirees saw returns in 2014 that will result in “modest” pension and interest rate increases, the State of Wisconsin Investment Board said Wednesday.
The $88.7 billion Core Fund, with a diverse portfolio, yielded a preliminary return of 5.7 percent, putting its five-year return at 9.3 percent. The Variable Fund, a stock fund, ended the year with a preliminary return of 7.3 percent and a market value of $7.3 billion.
Both funds ended near the one-year benchmark returns set by the board. The Core Fund is 5.6 percent and the Variable fund is 7.5 percent. For the three-, five- and 10-year periods, both funds are ahead of their benchmarks, according to Vicki Hearing, board spokesperson.
The Core Fund returned 13.6 percent and 13.7 percent in 2013 and 2012, she said. The Variable Fund returned 29 percent and 16.9 percent in those years.
“We love those double-digit returns, but it doesn’t happen all the time,” she said. “We are long term; that’s what is significant. Our goal is to maintain the system.”
The changes in retirement checks will occur in May, she said, and the final rate has not yet been set by Department of Employee Trust Funds.
The board has earned positive returns each year since 2009 for the Core Fund and in five of the last six years for the Variable Fund.
A statement from the board noted that consultants Callan Associates, Inc., and CEM Benchmarking, “indicate that (the board’s) decisions to increase internal and passive management, negotiate lower fees for external managers and invest in a mix of low-cost assets have helped produced favorable returns.”
Robert Conlin, secretary of the Department of Employee Trust Funds, said in the statement that the returns “mean that the positive momentum will continue in 2015, as we’ll be able to provide retirees another increase in their annuities and contribution rates for active employees and employers should continue their trend lower.”
Six other state trust funds managed by the board earned positive preliminary returns and met or surpassed their benchmarks for the period ending December 31, 2014, the board noted.
The board manages assets of about $103 billion. This includes state and local government investments and approximately $96 billion in Wisconsin Retirement System trust funds, which provides benefits to more than 588,000 current or former employees of state agencies, the university system, school districts and most local governments.
The WRS is the ninth-largest U.S. public pension fund and the 25th-largest public or private pension fund in the world.