MPERS’ retirement benefits are funded by employer contributions, employee contributions, and investment earnings. Investing is a tool that is commonly used to aid in pension plan funding and it is important to understand that most plans are long-term investors.
The fund’s investment returns can vary from year to year, but over longer periods are the largest funding source for MPERS. These returns can vary based upon the asset allocation of the portfolio, market performance, and the talent of the professionals managing the funds.
Even though MPERS’ investment staff pay close attention to the day-to-day investment returns and what is happening in the markets, they are more focused on long-term returns. For example, if you look at MPERS’ investment returns as of November 2020, the three-month return is 5.54%, which is below the Board’s assumed 7% rate-of-return benchmark. However, the 10-year return is 8.58%, which is above the assumed rate of return, and much more meaningful to the greater (and longer-term) investment picture.
MPERS’ long-term goal is to achieve the assumed 7% rate of return. The Board reviews the asset allocation annually to ensure it remains consistent with the return expectations of the plan.
