The State of Wisconsin Investment Board (SWIB) today announced preliminary 2020 year-end returns for the fully funded Wisconsin Retirement System (WRS).
The Core Fund, the larger of the two WRS trust funds with more than $120 billion in assets, ended the year with a preliminary net return of 15.21%. The Core Fund’s preliminary five- and ten-year returns net of external manager fees were 10.74% and 8.51%, respectively. SWIB beat its performance benchmarks for all these periods.
To help ensure the pension fund can meet its obligations, SWIB focuses on long-term results. SWIB’s preliminary five- and ten-year returns exceeded the long-term WRS investment target of 7.0%, which is expected to result in positive annuity adjustments for beneficiaries in 2021 and stable employer and employee contribution rates.
“We ended the year in a strong positive position,” David Villa, SWIB executive director and chief investment officer, said. “In the face of the dramatic downturn in the first quarter caused by the pandemic, and the continued market volatility throughout the year, we remained steadfast and committed to our long-term investment strategy. We were able to capitalize on market opportunities to generate returns and add value to the WRS.”
SWIB diversifies its assets among many types of public and private investments, optimizes its costs (which saved it $72 million over its peers in 2019 and $1.3 billion over the last ten years) and actively manages its assets to grow and protect the WRS trust funds. When looking over the last twenty-years, SWIB’s active management and its diversified holdings generated $34.5 billion for the Core Fund above what SWIB would have earned by simply investing in a low-cost passive portfolio consisting of 60% global equities and 40% domestic bonds. On a preliminary basis, SWIB’s investment management has added value to the WRS trust funds of more than $1.9 billion above benchmark returns over the last five years.
“Our robust and sophisticated investment strategy, strong investment management and services teams, and the investments we have made in our infrastructure helped us successfully navigate 2020,” Villa said. “As we look ahead, I am confident that our strong foundation will ensure that the WRS is well-positioned for whatever comes next.”
The Variable Fund, an optional stock-only fund with about $9.6 billion in assets, ended the year with a preliminary net return of 17.51% and preliminary a five- and ten-year returns net of external manager fees of 13.65% and 11.35%, respectively.
The Department of Employee Trust Funds will provide estimated ranges for annuity adjustments for the Core Fund and the Variable Fund this month and announce actual adjustments in March. Investment performance also affects contribution rates for public employees and employers. Rates for 2022 will be set in June.