SWIB's investment strategy is disciplined, balanced, and focused on long-term results. SWIB invests first to protect the pension plan from the impact of another major market downturn and then to earn reasonable returns.
SWIB diversifies its assets among many types of public and private investments and optimizes its costs, which saved $90 million over its peers in 2017 and $1.3 billion over the last 10 years.
According to the Pew Charitable Trusts, the WRS is one of the few well-funded public pension systems in the country.
Over a 20-year period through December 31, 2018, SWIB's active management and diversified holdings generated $43.8 billion for the Core Fund. This was above what SWIB would have earned by simply investing in a low-cost passive portfolio consisting of 60% global equities and 40% global sovereign bonds, assuming no contributions or withdrawals.
Meeting Investment Objectives
SWIB has developed a disciplined, prudent, and innovative investment strategy designed to weather a variety of economic environments and protect the members of the WRS from another major reduction, keep contributions stable and generate reasonable returns. SWIB's investment strategy takes into account that there will be investment gains in some years and losses in others and relies on professional investment management, diversification of investments, and a long-term investment strategy to achieve its goal. Meeting this investment objective has helped the WRS to be a well-funded system, as reported in a 50-year financial projection by the system's actuary.
One reason Wisconsin's pension system is so well-funded is the investment earnings SWIB has generated, which account for more than 70% of the total income of the WRS.
Diversified Asset Allocation
Each pension system works to meet its own unique set of objectives through a diversified asset allocation. Unlike some peers, who may be reaching for returns out of necessity and be over concentrated on stocks, SWIB has built a robust asset allocation.
This ensures that returns are still strong when the markets are hot but that the impact of a future downturn is lessened for WRS members.
Asset allocation is one of the most critical parts of SWIB’s investment strategy. Click here to learn more about asset allocation.
Through a disciplined, prudent and innovative approach to market opportunities, SWIB has provided consistent, long-term performance that has financially benefited the WRS. SWIB beat its one-, three-, five-, and ten-year benchmarks for the Core Fund as December 31, 2018.
Adding to the strong long-term performance is SWIB's ability to keep costs low. SWIB staff manages almost two-thirds of the assets of the WRS for one-fifth of what it would cost to pay external managers for the same work. Click here to learn more about how SWIB manages costs. Click here to learn more about internal management.
SWIB has long been considered a low-cost pension fund manager that provides solid returns for the WRS. SWIB is able to manage its costs effectively and provide respectable returns by combining active and passive management of the trust funds. Click here to learn more about active and passive management.