Oregon Pension Fund Investment Performance Highest Among Peer Public Funds Nationally for Past Decade

Legislature is set to consider plan to allow more internal management of Oregon assets and save millions.

SALEM – The Oregon Public Employees Retirement Fund posted the best investment returns over the past decade among peer funds nationally, according to a new independent ranking.

The analysis compares gross investment returns as of Decembr 31, 2012, and found that the performance of the Oregon pension fund was the highest among public funds with assets of more than $1 billion for the past 1-, 3- and 10- year periods.

The ranking comes from the Wilshire Trust Universe Comparison Service, a benchmark of asset positions and performance data for investment funds of different sizes.

“Oregon’s investment division has served Oregonians well and we will continue to seek the right strategies,” said State Treasurer Ted Wheeler. “To maintain strong performance on behalf of Oregon, we will need to stay ahead of the curve, and that includes constantly improving the investment program to respond to new opportunities and risks.”

The annual average return for the past three years was 9.57 percent, and it was 8.7 percent for the past decade. Oregon’s overall performance has benefitted from heavier reliance on alternative investments. The assumed long-term rate-of-return for the PERS fund is 8 percent, but that figure could be challenging to maintain given current low interest rates and lower projected returns for private equity investments.

The PERS fund relies on investment returns to pay roughly 70 percent of the benefits negotiated for public sector retirees.

The Oregon Investment Council, which oversees state investment policy, is asking the 2013 Legislature to approve the Investment Modernization and Cost Reduction Act. That proposal will increase the capacity to manage the PERS portfolio by converting the Investment Council to a public corporation. The legislation is the focus of a public hearing in the Senate Finance and Revenue Committee.

By increasing internal capacity, the investment division also would be able to limit outsourcing the management of parts of the portfolio, allowing the fund to potentially save millions of dollars in fees annually.