Tennessee Consolidated Retirement System’s FY20 investments out-earn pension peers, despite challenging economy

Nashville, TN – The Tennessee Consolidated Retirement System (TCRS) finished the 2020 fiscal year with 4.94% investment return. The portfolio earned nearly 10% in the last quarter of fiscal year 2020, rebounding from a low in March and exceeding earnings of peer state pension systems, despite an ongoing economic downturn due to the COVID-19 pandemic.

Tennessee Consolidated Retirement System (TCRS) is the defined benefit pension plan serving nearly 370,000 active and retired state, higher education, and participating local government employees, as well as K–12 public teachers. Administered by the Tennessee Department of Treasury, TCRS provides a lifetime retirement, survivor and disability benefit for employees and their beneficiaries.

The TCRS portfolio was valued at $53.4 billion at the close of fiscal year 2020, which ended June 30. Returns for the TCRS over the trailing one, three, and five-year periods were in the top 10% of peer funds measured, while returns for the trailing ten-year period were in the top 15%. The portfolio’s returns were easily within the top quartile (top-25%) and top quintile (top-20%) for all periods measured.

Last fiscal year, the TCRS paid $2.75 billion in benefits to 146,382 retirees across the state, over 92% of whom remain in Tennessee. The retirement benefits paid by TCRS have an economic impact in all 95 counties. The 4.94% return out-earned similarly sized state pension systems by four times the 1.2% median return, producing nearly $2 billion in additional value at the end of the period.

The TCRS portfolio is invested by the Tennessee Department of Treasury’s Investment Division, a team comprised of more than 30 professionals with extensive education, professional training, and designations to manage its investments. The department achieves investment returns consistent with its peers while maintaining an investment expense that is among the lowest in the southeast.

“FY2020 was the most difficult investment environment since the global financial crisis,” said Tennessee Treasury’s Chief Investment Officer, Michael Brakebill. “Our investment focus on diversification with protection for economic weakness yielded this exceptional result.”

In 2019, The Pew Charitable Trusts published research that ranked the TCRS as one of the best-funded state pension programs in the country. A nonprofit focused on non-partisan government research, Pew Charitable Trusts listed Tennessee among the top three states best prepared to fulfil pension promises made to public employees.

State Treasurer David H. Lillard, Jr. points to the sound financial management and proactive investment management as the source of its success.

The Tennessee General Assembly has consistently voted to fully fund the actuarially determined contribution – a key factor in Pew’s recognition of successful public pension plans.

 “When retirement plans around the nation are under scrutiny for their performance, TCRS is thriving. Our Governor and General Assembly ensure the plan is fully funded every year,” Treasurer Lillard said. “The Tennessee Department of Treasury strives to be good financial stewards of the state’s financial resources. This $2.5 Billion in investment income is evidence of our commitment to both active and retirement members of the TCRS pension plan.”

Information about TCRS, including investment reports, can be found at Treasury.Tn.gov.