INVESTMENTS

Pooled assets, professionally managed

The assets of TRA, the Minnesota Public Employees Retirement Association (PERA), and the Minnesota State Retirement System (MSRS) are pooled and managed by investment professionals at the State Board of Investment (SBI) in accordance with Minnesota Statutes, Chapters 11A and 356A.

Investment objectives

TRA’s pension contributions from employees and employers are invested in the Combined Funds. The Combined Funds include the assets of active and retired public employees who participate in the defined benefit plans administered by

  • TRA
  • Minnesota State Retirement System
  • Public Employees Retirement Association.

TRA does not own any underlying assets, but instead owns a participation in the pooled Combined Funds. Because these assets normally accumulate for thirty to forty years, SBI’s objective is to take advantage of the long investment time horizon offered by equities and alternative assets in order to meet its actuarial return target and ensure that sufficient funds are available to finance promised benefits at the time of retirement. After a five year period where the 2012 Legislature lowered the actuarial return assumption from 8.5 percent to 8.0 percent, the actuarial return assumption returned to 8.5 percent as of July 1, 2017.

The long term objectives of the Combined Funds are:

  • Provide returns that are 3-5 percentage points greater than inflation over the latest 20-year period; and
  •  Outperform a composite market index weighted in a manner that reflects the actual asset mix of the Combined Funds over the latest 10-year period.

Consistent with these objectives, the SBI maintains a long-term asset allocation for the Combined Funds as follows:

Public equity, 49 percent
Fixed income, 16 percent
Private markets, 25 percent
Treasuries, 8 percent
Cash, 2 percent

Based on values on June 30, 2018, the Combined Funds returned 4.6 percentage points above the CPI over the last 20 years and returned 0.4 percentage point above the composite index over the past 10 years. Investment returns ranked in the 10th percentile over the past five years and in the 19th percentile over the past 10 years, compared to similar funds in the Trust Universe Comparison Service.

Refer to the Minnesota State Board of Investment website for investment details.

TRA Investment Returns and Inflation Analysis

Fiscal year 2019 – to date

Fiscal year 2018

Fiscal year 2017

Fiscal year 2016

Refer to the TRA CAFR, Investment section, for details.

Investment performance

Combined Funds Performance vs. Composite Index FY 2013 – 2018

Combined Funds Performance vs. Composite Index FY 2013 – 2018

Text description of investment performance chart

Combined funds

Portfolio Distribution: Policy Asset Mix (as of June 30, 2018)

POLICY ASSET MIX AS OF JUNE 30, 2018

Text description of investment performance chart

 

Portfolio Distribution: Actual Asset Mix (as of June 30, 2018)

ACTUAL ASSET MIX AS OF JUNE 30, 2018

Text description of investment performance chart