Illinois’ Teachers’ Retirement System Reports First Loss Since 2009

By David G. Barry

For the first time since 2009, the Teachers’ Retirement System of the State of Illinois (TRS) has posted a fiscal year loss.

The $62.7 billion system said it had a negative 1.17% return for the year ended June 30, a result it called “favorable” compared to similar public pension plans. According to a study by Wilshire Trust Comparison Services, the medium return rate of large public pension plans was negative 7.25%.

Over the past 13 years, the closest TRS came to reporting a loss was in 2016 when it had a gain of 0.01%. In fiscal year 2009, TRS reported a return of negative 22.7%.

The loss follows a 25.5% net return for the fiscal year ended 2021, which sent the system to a record $63.9 billion in assets. The results also enabled the system to decrease its unfunded liability as of December 31 to $79.9 billion and increase its funded ratio to 42.5% from 40.5%.

TRS said it will pay more than $7 billion in benefits in 2022 to more than 128,000 members and their families.

In a statement, Stan Rupnik, TRS’ executive director and chief investment officer, said that “due to the under-funded status of TRS, the system’s primary objective is to protect member assets against large market drawdowns caused by economic volatility.”

As a result, the system, he said, “believes the most prudent strategy is a diversified portfolio that seeks to participate in the upside of the market but also positioned to better protect assets in times of high market volatility.”

At the end of the fiscal year, it had 32.6% of the portfolio in domestic and international stock markets, 24.3% in bonds and short-term assets, 19.7% in real estate and other tangible assets, 16.2% in private equity and 7.2% in hedge funds and other diversifying strategies.

“The TRS conservative strategy performed as intended,” Rupnik said. “As significant market volatility, rising inflation and interest rate increases hit in early calendar year 2022, the TRS portfolio performed very well.”