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The Teacher Retirement System of Texas reported during a recent board of trustees meeting that the pension fund’s investment portfolio returned 12.7% for the fiscal year ended August 31, well ahead of its long-term annualized return of 7%.

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According to a November release, the pension fund’s asset value was $209.5 billion as of the end of the fiscal year, up from $186.6 billion at the end of fiscal 2023.

The quarterly meeting also included the retirement system’s annual “health checkup,” which involved discussion of the TRS’ actuarial valuation, conducted and presented by actuarial firm Gabriel, Roeder, Smith & Co. The valuation is intended to help determine whether the current statutory contributions are enough, as well as explain changes in the fund’s actuarial condition and the impact on the fund’s unfunded actuarial accrued liability and its funded status.

“Annual market returns have been volatile from year-to-year but have met the TRS assumption over the past decade,” according to a TRS statement.

According to the actuarial assumptions, the TRS’ funded ratio was 77.8% for fiscal 2024, up from 77.5% in fiscal 2023, and the fund currently is expected to be fully funded by 2052. The 28-year funding period is three years short of qualifying for possible benefit enhancements, as determined by the Texas Legislature.

The retirement system did not disclose asset allocation or asset performance for the fiscal year, but the board approved changes to the pension fund’s asset allocation in July for the first time in five years. The TRS revises its strategic asset allocation at least every five years as required by state law, and the previous adjustments were made in July 2019.

The new allocation moved regional weights in its public equity portfolio and increased the portfolio’s exposure to U.S. equities and non-U.S. developed asset classes, while paring back its exposure to emerging markets and related foreign currencies. Among the changes, the TRS lowered its allocation to non-U.S. developed assets to 5% from 13% and slashed its emerging markets investments to 1% from 9%, while lowering its private equity holdings to 12% from 14%.

Meanwhile, the allocation for nominal government bonds was reduced to 10% from 16%, while real, or inflation-linked, government bonds were increased to 6% of the portfolio from zero previously.

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Tags: actuarial valuation, Funded Ratio, investment return, Teacher Retirement System of Texas, TRS