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KPERS Investments Return Less Than Hoped in 2015 and 2016

Photo by Stephen Koranda

The Kansas employee pension plan has not been getting a very good return on its investments recently.

KPERS officials said Monday that stock market volatility led to a return of only 0.2 percent last year. So far this year, the KPERS investments have returned 3 or 4 percent.

The retirement plan assumes a long-term return of 8 percent. If that goal isn’t met, the plan will need more money from the state and KPERS members to make up the difference.

However, Republican state Senator Jeff King says the report wasn’t all bad news.

“While the investment returns are below 8 percent, they are substantially higher than market averages. Our board’s doing a great job in this investment climate. It illustrates the dangers of having an 8 percent investment return assumption that you base your entire retirement system on,” says King.
King says KPERS may need to reconsider its assumption that investments will yield an 8 percent return over the long term. KPERS officials will meet regarding that issue later this year.

The modest returns are also tied into a strategy where the state issued bonds for KPERS earlier this year. The idea was that investing the money would return more than the interest on the bonds.

In the first year, it looks like that will happen - but just barely. KPERS officials say it appears their investments will earn just enough money to cover the bond payments and have a little left over. Senator King isn’t concerned by the first-year performance.

“This is a 30-year bond. We have historically low interest on that bond. I trust 30-year investment returns will show that was a prudent decision,” says King.
The interest on the bonds is about 4.7 percent. KPERS has to make more than that in investment income to come out ahead.


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