Portfolio Down, but Benefits Remain Safe

In a difficult investment environment, the Retirement System portfolio returned -4.4 percent for the fiscal year ending June 30, 2008, while the S&P 500 index returned a -13.1 percent for this same timeframe.

Since then, factors like soaring energy prices along with housing, credit and September's financial market turmoil have continued to weigh heavily on the economy.

KPERS plans for difficult periods like this. We ride them out with a carefully diversified portfolio and a steady, long-term investment strategy. Over time, this approach helps keep benefits secure for members. The last four years of positive double-digit returns have buoyed KPERS’ three- and five-year average annual returns above the long-term 8 percent target.

• 1-year return -4.40%
• 3-year return 8.20%
• 5-year return 10.40%

KPERS must be willing to accept some short-term risk in the portfolio to gain the long-term 8 percent return.

Along with a long-term investment horizon, asset allocation is also an important tool in helping KPERS weather weak markets like we’ve seen recently. KPERS invests in many broad investment sectors:

• Domestic equity
• International equity
• Fixed income
• Treasury inflation protected securities (TIPS)
• Real estate
• Alternative investments
• Cash

By investing in these sectors, different types of investments can help offset some of the potential losses in the portfolio during times of negative volatility like we are experiencing now.

Fortunately, market uncertainty does not extend to member benefits. Retirement benefits for retirees and current members are safe and guaranteed by the State of Kansas, even during bumpy economic times like these.