The overall objective of TMRS’ Investment program is to ensure that members, retirees and beneficiaries are provided with the benefits they have been promised by their employers at a reasonable and predictable cost to the employers. Assets will be invested for total return with appropriate consideration for portfolio volatility (risk) and liquidity. Emphasis is on both capital appreciation as well as the production of income in order to satisfy the short-term and long-term funding needs of TMRS. Total return includes dividends, interest and realized and unrealized capital appreciation.
Investments are made with the degree of judgment and care, under the circumstances that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, considering the probable income from the securities and probable safety of their capital and in consideration of the purposes, terms, distribution requirements and other circumstances of the TMRS fund. Investment and management decisions respecting individual assets will be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the fund.
In 2011, TMRS continued implementing the following strategic target allocations which were adopted by the Board in June 2009, with implementation to occur over a multi-year period (see pie charts.)
There were several initiatives during 2011 aimed at continuing our progress toward the target allocations, including monthly commitments to U.S. and international equity index funds. By the end of 2011, the equity target allocations were met with 40% of the fund invested in passively managed equity index funds (20% in domestic equities and 20% in international equities). TMRS began funding its real estate target allocation by committing $200 million to real estate limited partnerships and funding $97 million. With the assistance of TMRS’ real estate consultant, ORG, TMRS will continue to seek out and fund additional real estate investments over the next few years in order to meet its 10% target. In addition, TMRS funded its 5% target allocation to the real return asset class through investment in global inflation-linked bonds. Assets allocated to fixed income managers totaled 54.2% and will gradually move to the 35% target allocation as fixed income funds other asset classes.
The Board will continue to authorize implementation to the strategic target allocations in stages. To ensure that the risk tolerance remains appropriate, the target allocations will be reviewed at least annually for reasonableness relative to significant economic and market changes or changes to the Board’s long-term goals and objectives.
The overall one-year rate of return on the $18.5 billion investment portfolio was 2.41% with fixed income the best performing asset class, earning 7.99%, while the return on equities was 1.03% domestic and -13.35% international.