Some OPERS members may wonder how their pension funds are invested and what impact, if any, they will face if the pension portfolio drops in value. Click the following links to review the most current Statement of Investment Policy. In it you will find information about the investment philosophy, investment structure, and adviser guidelines.
Here are answers to some frequently asked questions about investments.
How big is the OPERS investment portfolio?
As of December 31, 2019, OPERS had $10.5 billion in total assets and URSJJ had $365 million in total assets.
What is the portfolio invested in?
Broadly speaking the OPERS portfolio is invested in three major asset classes which are U.S. stocks, international stocks and domestic bonds. Each asset class is very broadly diversified. For example, OPERS’ stock portfolio alone has a stake in over 2,800 companies. The current strategic target allocation calls for 40% U.S. stocks, 28% international stocks, and 32% domestic bonds.
How do you determine the amount to invest in each asset class and who makes that decision?
The portion of the portfolio allocated to each asset class is the most important decision an investor can make and it has the greatest impact on long-term investment results. The System’s portfolio asset allocation is decided after intensive analysis and study. The goal is to produce the highest level of investment return at a given level of expected risk. This decision can only be made by the OPERS Board of Trustees. The investment consultant and the OPERS staff prepare the analysis to assist the Board in this decision. The asset allocation is reviewed periodically – about once every three years.
Who decides which securities to buy and sell?
The OPERS Board hires and retains professional investment management firms to manage assets for the System. Each firm is allotted a portion of the total portfolio to manage. The portfolio manager(s) at each firm decides which securities to buy, sell or hold for the portfolio managed for OPERS.
How are Investment Management firms selected?
The OPERS Board is responsible for both hiring and terminating the investment management firms that work for the System. They are assisted in this process by OPERS staff and an investment consulting firm. The goal is to find the firm(s) that has particular expertise in managing the type of portfolio to be assigned. The OPERS staff and the investment consultant prepare requests for proposal (RFP’s) according to the specifications approved by the Board. The RFP’s are posted on the OPERS website in an open bidding process. Minimum criteria in the RFP assist interested investment managers in determining whether they are a possible match for System’s requirements. OPERS staff and the investment consultant review the submitted proposals and compile an analysis for the Board based upon responses received. The Board reviews the analysis of the responses and typically selects the top finalist firms to participate in an interview before the Board. Normally after hearing presentations from the finalist firms, the Board makes their selection.
When an investment management firm is selected, can the firm buy any type of investment with the System’s money?
No. Each investment management firm may only invest according to the specific guidelines established by the Board for the portfolio assignment the firm has been given. As a simple example, if the firm is hired to manage a portfolio of U.S. equities the firm won’t be allowed to fill the portfolio with bonds.
How is the investment consultant hired and what is the consultant’s role?
The investment consultant is hired by the Board following a competitive bidding RFP process similar to that described above. The investment consultant prepares periodic and special analysis reports with guidance and assistance from OPERS staff for the Board regarding all aspects of the investment program. Monitoring investment performance, investment manager searches and asset allocation studies are all part of the normal duties of a consultant.
How is my retirement benefit affected if the investment portfolio declines in value?
The market value of the OPERS investment portfolio has no direct impact on a member’s retirement benefit. The member’s benefit is determined by years of service and final average pay. Changes in the market value of the OPERS investment portfolio are not in any way part of the formula used to determine benefits due.
Is the investment structure and process used by OPERS unusual or is it fairly typical?
The investment program structure and process is very typical among medium sized public pension funds across the country. Most similar sized funds retain institutional investment management firms to manage some if not all of their investment portfolios and the most of them use the services of an investment consulting firm.
Below is a list of OPERS’ and URSJJ investment managers.
OPERS Balance & Asset Allocation
as of December 31, 2019
|Manager||$ Mkt Value (MM)|
|Northern Trust Company||Cash Account||16|
|Grand Centre||Commercial Real Estate||12|
|BlackRock Financial Management||Enhanced Fixed Income||1,560|
|Hoisington Investment Management||Interest Rate Anticipation||352|
|Metropolitan West Asset Mgmt||Active Fixed Income||949|
|Domestic Fixed Income||3,193|
|Mondrian Investment Partners||International Equity-Value||656|
|Baillie Gifford||International Equity- Growth||393|
|BlackRock Institutional Trust||ACWI xUS Growth Index||356|
|BlackRock Institutional Trust||ACWI xUS Index||1,554|
|BlackRock Institutional Trust||Russell 1000 Index||1,774|
|Mellon Cap Mgmt||Enhanced US Equity||598|
|State Street Global Advisors||Enhanced US Equity||594|
|AJO||Large Cap Value||324|
|Westfield Capital||Large Cap Growth||332|
|UBS Global Asset Mgmt||Small Cap Growth||212|
|Barrow Hanley Mewhinney||Small Cap Value||223|
|DePrince, Race & Zollo||Small Cap Value||219|
URSJJ Balance & Asset Allocation
as of December 31, 2019
|Manager||$ Mkt Value (MM)|
|Northern Trust Company||Cash Account||2|
|BlackRock Financial Management||Enhanced Fixed Income||54|
|Hoisington Investment Management||Interest Rate Anticipation||13|
|Metropolitan West Asset Mgmt||Active Fixed Income||33|
|Domestic Fixed Income||111|
|BlackRock Institutional Trust||ACWI x-US Index||103|
|BlackRock Institutional Trust||Russell 1000 Index||126|
|BlackRock Institutional Trust||Russell 2000 Index||24|