The Kentucky Public Pensions Authority (KPPA) reported the highest single-year investment return in its history. Returns for the County Employees Retirement System (CERS) were four times higher than the current CERS 6.25% assumed rate of return.
The CERS nonhazardous pension plan closed out Fiscal Year 2021 with a 25.69% increase, while the CERS hazardous pension plan earned 25.56%. CERS insurance plans had similar fiscal year returns.
CERS continues to have one of the lowest assumed rates of return in the nation after the former Kentucky Retirement Systems (KRS) Board of Trustees adopted the 6.25% rate in 2017.
In 2018, KRS took a more conservative investment approach. KRS moved more funds into core fixed-income accounts, which generate smaller returns and have lower risk, and reduced private equity investments. KRS has maintained an even higher level of fixed-income investments than its investment policy recommends. Fiscal Year 2021 returns show the CERS nonhazardous pension plan still has 12.84% invested in core fixed-income accounts, despite a target of 10%.
Fixed-income investments generated the poorest returns for FY 2021, with one fund posting a 10.58% decrease. In comparison, the top U.S. equity fund generated an 81.91% return.
The CERS Board of Trustees assumed control of the local pension system and its investments in April. The new CERS Investment Committee will meet on August 25.
The pension and insurance funds for the Kentucky Employees Retirement System (KERS) and State Police Retirement System (SPRS) also posted higher than anticipated returns. Total KPPA assets are now $22.7 billion, with CERS accounting for $16.3 billion (72%).