The State of Wisconsin Investment Board (SWIB) today announced that its 2021 performance generated strong returns for the fully funded, $147 billion Wisconsin Retirement System (WRS).
The Core Fund, the larger of the two WRS trust funds with more than $136 billion in assets, ended the year with a preliminary net return of 16.89%. The Core Fund’s preliminary five- and ten-year returns net of external manager fees were 12.47% and 10.10%, respectively. SWIB beat its performance benchmarks for all these periods.
SWIB focuses on long-term results to help ensure the pension fund can meet its obligations. SWIB’s preliminary five- and ten-year returns exceeded the long-term WRS investment target of 6.8% and are expected to result in positive annuity adjustments for beneficiaries in 2022 and stable employer and employee contribution rates. When looking over the last twenty years, SWIB’s active management and diversified holdings generated $34.3 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 $2.2 billion above benchmark returns over the last five years.
“In 2021, SWIB generated strong investment returns in a market environment dominated by the ongoing effects of the coronavirus pandemic, continued substantial fiscal stimulus, and the response of the Federal Reserve while interest rates, inflation, and supply chain backlogs grabbed headlines and influenced investor sentiment,” Edwin Denson, SWIB executive director and chief investment officer, said. “2021 presented unusual challenges for SWIB, but our staff once again navigated the market volatility throughout the year and remained steadfast and committed to our long-term investment strategy.”
SWIB diversifies its assets among many types of public and private investments, optimizes its costs (which saved it $1.1 billion over its peers in the last ten years) and actively manages its assets to grow and protect the WRS trust funds.
“We have implemented a robust and diversified asset allocation that can help us navigate changes in market conditions,” Denson said. “I am motivated knowing that SWIB will continue to be an innovator in the future to keep pace with an ever-changing investment management landscape. And while we will change and evolve, our commitment to our mission, vision, and values, which have established us as an economic pillar for the state of Wisconsin, remains the same.”
The Variable Fund, an optional stock-only fund with more than $10.9 billion in assets, ended the year with a preliminary net return of 19.95% and preliminary five- and ten-year returns net of external manager fees of 15.52% and 13.75%, respectively.
The Department of Employee Trust Funds will soon provide estimated ranges for annuity adjustments for the Core Fund and the Variable Fund and announce actual adjustments in March. Investment performance also affects contribution rates for public employees and employers. Rates for 2023 will be set in June.
SWIB’s strong management of the WRS trust funds has helped fuel one of the only fully funded public pensions in the country for about 652,000 current and former employees of state agencies, the university system, school districts and most local governments. The WRS consistently ranks among the 10 largest public pension funds in the U.S. SWIB provides a strong, steady economic pillar for the state of Wisconsin by growing the trust funds under its management, managing risk, and optimizing costs over the long term. As of Dec. 31, 2021, the WRS accounts for approximately 89% of the more than $165.6 billion of total assets under management at SWIB. In addition to the more than $147 billion in WRS trust funds, SWIB also serves the state by investing the State Investment Fund, University of Wisconsin System Trust Funds, Injured Patients and Families Compensation Fund, State Life Insurance Fund, and Historical Society Trust Fund.