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A message from Treasurer Read about COVID-19 and your PERS investments

A message from Treasurer Read about COVID-19 and your PERS investments

As COVID-19 respiratory illness affects people across the state, country, and world, Oregon's number one priority is making sure Oregonians are safe and healthy.

At the same time, we're being asked what changes in the economy could mean for the Oregon Public Employees Retirement Fund. 

In late February, the stock market started reacting to concerns about the coronavirus, and that response has continued, with big drops in stock prices so far in March.

Link to OHA and COVID-19 Information

This reaction provides us with a real-time reminder that economic cycles and financial markets can be volatile. While the recent economic expansion—the longest in our country’s history—has been a powerful tailwind as we invest and manage Oregon public employees’ retirement funds, we know that the investment decisions we make for OPERF have to stand over the long haul, in both up and down markets.

We can't predict how the spread of COVID-19 will affect global economic activity and financial markets. Instead, to prepare for whatever the future may bring, Treasury has taken deliberate steps over the past several years to make OPERF more resilient in anticipation of changing environments:

  • We’ve reduced and re-balanced risk across the portfolio.

  • We’ve lowered the amount of capital allocated to private equity, and made changes to OPERF’s fixed income and real estate investment strategies so that those important asset classes play more pronounced, defensive roles should the economy enter a downturn.

  • We’ve lowered the amount of capital allocated to private equity, and made changes to OPERF’s fixed income and real estate investment strategies so that those important asset classes play more pronounced, defensive roles should the economy enter a downturn.

  • We’ve reduced the fund’s operating expenses by increasing the proportion of assets managed internally by Treasury staff. 

  • We’ve increased our corporate governance activities to ensure that our investment practices pursue strategies that produce strong, sustainable long-term results.

This does not mean OPERF is immune to economic uncertainty and financial market volatility. Instead, these steps have improved the portfolio’s resiliency so that it’s better positioned to weather all types of economic and financial market conditions.

We've seen this play out over the last two years. At the end of 2018, stock prices dropped sharply, but OPERF posted modest positive returns while other public plans ended 2018 in the red. In 2019,  OPERF was up 13.6 percent —a good absolute result, and nearly double the fund’s assumed rate. Compared to similar public pension plans, we were able to achieve our returns while maintaining much less exposure to stocks and other risk-based assets.

There's a lot of uncertainty right now surrounding COVID-19 and its broader effects. Please know that we'll continue managing Oregon’s $80 billion public employees retirement fund with a focus on sustainable, long-term returns and strong risk management practices that fortify portfolio resiliency on behalf of both current and future PERS beneficiaries.

One more thing: the investment portfolio also includes the Individual Account Program’s Target Date Funds. In these funds, PERS members’ investment risk tolerance is aligned with age. The closer you are to retirement, the more exposure you’ll have to bonds and other lower-risk investments. Younger members with longer retirement horizons will have more exposure to stocks and other higher-risk investments. 

While our Treasury investment team tracks fund performance every day, PERS credits Target Date Fund earnings to your IAP account once per year, in the spring. The upcoming credit to your IAP account, following the March 30, 2020, PERS board meeting, will reflect investment performance for the 2019 calendar year. For current state employees, changes happening in the stock market right now and over the next nine months won't affect your IAP account until the spring of 2021. 

Thank you for reading. I hope this information is useful, and I hope learning more about the strategies behind how Treasury invests your retirement funds is helpful to you as Oregon continues our response to COVID-19. 

Sincerely, 

Tobias Read

Oregon State Treasurer


To stay involved and learn more, sign up for Treasury’s Invested for You newsletter and information from PERS

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