How's my Money Invested?
Investing Your Contributions
The PSERS Board of Trustees acts as the fiduciaries of the Fund and oversees
PSERS investments. In performance of their investment duties, the Board and
staff delegated with the investment authority are held to the Prudent Investor
Standard. The Prudent Investor Standard ensures that a degree of judgment,
skill, care, caution, discretion and loyalty are exercised when dealing with
PSERS investments. Investments are also managed in accordance with all
applicable state and federal laws, rules, and regulations.
PSERS’ overall investment objective is to be able to provide benefits to
members through a carefully planned and well-executed investment program
designed to maximize investment returns and minimize investment risks. The
objective is to realize a return sufficient to achieve funding adequacy on an
inflation-adjusted basis. Funding adequacy is achieved when the actuarial
market value of assets is at least equal to the System’s projected benefit
obligations. The System has a return objective of meeting or exceeding the
actuarial rate (currently 7.5%) over the long term.
The Board also has broader objectives that include investing the assets of
the System to maximize returns for the level of risk taken and to strive to
achieve a return that exceeds the Policy Index. The Policy Index is the sum of
each asset’s (real estate, stock, etc.) target weight within the investment
portfolio times its actual total return.
PSERS Investments Include:
Short-term investments are generally investments that mature in less than 12
months. Short-term investments consist of the PSERS Short-Term Investment Fund,
as well as other domestic and international short-term investments.
PSERS fixed income investments consist of domestic mortgage-backed
securities, U.S. government and agency obligations, domestic corporate and
taxable municipal bonds, miscellaneous domestic fixed income, collective trust
funds, and international fixed income investments.
Common and Preferred Stock
Common stock entitles the owner to a share of the corporation's profits and a
share of the voting power as a shareholder/partial owner of the company whose
stock PSERS holds.
Like common stock, preferred stocks represent partial ownership in a company
but have no voting rights. Preferred stock dividends do not fluctuate and the
holders of preferred stock shares receive priority in the payment of dividends.
PSERS holds both domestic (U.S.) and international common and preferred stock.
Collective trusts are created when multiple institutional investors form a
trust to pool resources to join in financial transactions which otherwise would
not be possible on an individual basis.
PSERS also has directly-owned real estate and equity real estate, in which a
profit is returned based on the cash invested divided in the cash return from
rents or resale, or for the long-term, on the projected property value minus the
Alternative investments – Private Equity, Private Debt & Venture Capital
PSERS’ private equity investments consist of either making investments or
buying out companies that are not publicly traded. Private equity investments
are usually invested for the long term.
Private debt investments by PSERS consist of the acquisition of mortgages for
profit. By “owning a mortgage,” PSERS receives the interest on the loan and/or
a priority claim on the real estate in the event of a default.
The venture capital investments are usually a private equity typically for
investing in developing companies with high potential with the goal of having
those companies eventually offer publicly traded stock.
Investments and Your Pension
PSERS always strives to achieve the maximum earnings on investments, but your
retirement benefit is not dependent on the investment performance. PSERS is a
defined benefit plan. That means that no matter the rate of return earned on
investments, even when investments may take a downturn, the Commonwealth of
Pennsylvania guarantees your annuity.