The Retirement Systems of Alabama's pension fund for state and local government employees set a record for investment earnings during the last fiscal year, RSA CEO David Bronner said.
The Employees' Retirement System fund earned $2.9 billion, or 21.2% on its investments, according to Bronner's report to the ERS Board of Control at Tuesday's quarterly meeting.
The ERS fund grew from $14.1 billion to $16.6 billion during the fiscal year, which ended Sept. 30, while paying out $1.4 billion in benefits to 60,000 retirees.
"It was a remarkable year," Bronner said. "I've never seen one like it. We were in the high teens one other time."
The investment earnings are important because they are the largest source of money for the ERS fund and the other RSA's pension funds, which overall had almost 400,000 active and retired members according to the 2023 annual report.
Other sources of money for the funds are employee contributions and employer contributions. The employer contributions come from the Legislature and local governments.
Bronner said the RSA spreads gains and losses over a five-year period to stabilize the employer contributions and avoid overreactions to exceptionally good years as well as bad ones, like the losses absorbed two years ago.
Overall, the ERS investments have earned 9% over the last five years and 8.1% over the last 10 years.
The investments are diverse, with 62% in equities, 14% in fixed income, 9% in real estate, 8% in cash, and 7% in private equity and placements.
Equities were by far the most profitable during the fiscal year, earning 30%. Fixed income earned 11% and real estate earned 7%.
The RSA's real estate includes office buildings, eight resort hotels in Alabama, the Robert Trent Jones Golf Trail, 55 Water Street, the largest building in New York City, and other investments. The RSA is building a new State House that it will lease to the Alabama Legislature.
Bronner said the last three years have been the best ever for the resort hotels, led by the Grand Hotel in Point Clear.
It was a strong year for many public pension funds across the nation. Marc Green, RSA's deputy director for investments, said the median rate of return for 41 public funds greater than $1 billion was 17.9%.
The ERS return of 21.2% ranked in the top 18%. The numbers come from the investment management firm State Street.
The Teachers' Retirement System, which is for education employees and retirees and is the largest fund managed by the RSA, also saw its investments earn 21% during the last fiscal year. The TRS fund grew from $27.8 billion to $32.5 billion during the year while paying out $5.7 billion in pension benefits.
Those numbers were reported at the TRS quarterly board meeting last week.