Secure Your Future
Annual TRS investment review: It was a turbulent 2008
Feb 19, 2009 3:39 PM
| VARIABLE ANNUITY | ||
| The unit value is computed during the latter part of each month. Recent values are: | ||
| VARIABLE A | VARIABLE B | |
| November | 45.089 | 19.535 |
| December | 41.509 | 19.495 |
| January | 42.493 | 19.496 |
Last issue we promised more details on the 2008 investment year. There is no question that 2008, with the housing bubble bursting, the banking sector meltdown, and the lack of credit — the lifeblood of the economy — created the worst economic environment since the early to mid 1970s; some even say the Great Depression of the 1930s.
Some of you might recall that in the 1970s about 12,000 educators were dismissed (laid off). Chaos reigned in the schools as thousands of teachers had to be moved from school to school to replace the newer teachers who were laid off. For those of the staff lucky enough to keep their jobs, class size jumped in many cases to the 40-50 range. This is what would have happened in September if Congress hadn’t passed the federal stimulus package we fought for and Mayor Michael Bloomberg carried out his threat to fire 14,000 educators. And, even though the federal stimulus bill has been signed, we still must all join the UFT’s campaign to fight the threat of other cuts by:
Supporting the UFT’s fight in New York by signing up on the UFT Web site to volunteer in the campaign here to prevent budget cuts. Your participation is essential.
Sign up now to attend the UFT’s rally in lower Manhattan on March 5. Help your chapter leader’s efforts to get a large turnout.
How was our retirement security affected by the events of 2008?
The Pension Fund, which is invested about 70 percent in equity investments like stocks, private equity and real estate, and 30 percent in fixed income investments — various kinds of bonds — lost about 27 percent of its value during the calendar year 2008. These losses have not affected the city’s ability to meet all of its pension obligations, but these losses will have to be made up in the future by increased contributions by the city to the Retirement System. These increased contributions will have an effect on future city services and therefore the quality of life for all New Yorkers.
The Fixed Dollar Annuity is co-invested with the Pension Fund. The Fixed Dollar Annuity crediting rate of 8.25 percent return is guaranteed until June 30, 2009, and then it will be reviewed by the New York State Legislature. It can be reduced at that time, but no lower than to 7 percent.
We have five investment choices that have no guaranteed rate of return but earn the returns of the financial instruments in which they are invested. The five investments are:
The Diversified Equity Fund. This must be invested in a broadly diversified portfolio of domestic and international stocks (in developed countries). The objective is to achieve a rate comparable to the return of the broad stock market.
The Stable Value Fund. This is invested in a mixture of stable value instruments such as “wrapped” portfolios of high-quality bonds. The wrap is provided by an insurance company to protect the value of the portfolio. Part of the portfolio is invested in Guaranteed Investment Contracts (GIC’s) issued by highly rated insurance companies; there are no stocks in this portfolio. The objective is to preserve capital and provide a steady rate of return.
The International Equity Fund. This fund invests primarily in the stocks of non-U.S. companies located in the developed countries of the world. This fund is invested together with the assets in the International Sector of the Diversified Equity Fund. The objective is to provide long-term capital growth and to achieve a rate of return equivalent to the return of the non-U.S. developed equity markets.
The Inflation Protection Fund. It invests in multiple asset classes such as fixed-income securities like Treasure Inflation Protection Securities (TIPS), commodities, real estate, mortgage-related securities, stocks and others. The objective is to provide, over a full market cycle, a real rate of return in excess of inflation.
The Socially Responsive Equity Fund. This fund invests in an actively managed portfolio of large and middle-size U.S. and non-U.S. companies. These companies show leadership in such areas as:
- Environmental concerns
- Work force diversity
- Progressive employment and workplace practices
- Public health
This Fund avoids companies that derive substantial income from tobacco, alcohol, weapons, etc. The objective of the fund is to achieve, over a full market cycle, positive long-term growth and to earn a rate of return comparable to the return of the broader equity market while reflecting social priorities.
There is no guarantee that these funds will meet their objectives. For more information on any of the funds, contact TRS.
Below are the results of the investment programs for periods ending Dec. 31, 2008. Performance is annualized for periods greater than one year. Results in the future are not guaranteed to match results of the past.
TDA investment changes
For in-service members and retirees with deferred accounts, investment changes can be made up to March 1, for changes to begin in April. Changes can be made in 5 percent increments to be completed over a three-, six-, nine- or 12-month period. If you miss the March 1 date your election would be made beginning on July 1.
Retirees collecting a TDA check each month may request an investment change by Feb. 1, March 1, May 1, Aug. 1 and Nov. 1, for changes to begin on April 1, July 1, Oct. 1 and Jan. 1.
QPP investment changes
The ASF/ITHP accounts for members in Tier I and II of in-service members, and the ASF/ITHP portions of a retiree’s allowance may be changed quarterly. In-service members must act 30 days before the beginning of a new quarter and retirees must act 60 days before the beginning of a new quarter. Changes can be in increments of 5 percent and over a a three-, six-, nine- or 12-month period.
Applications that arrive after the cutoff date will be held for the next quarterly open period.
All of the investment programs are carefully selected and monitored by the Retirement Board. You should make your choice based on your investment philosophy and your ability to withstand the volatility of some of the choices. Remember the TDA program is voluntary and a supplement to a guaranteed traditional defined benefit pension. The pension will be paid monthly and is not affected by current economic factors such as the volatility of the stock market.
“Secure your future” is compiled and written by Mel Aaronson, Sandra March and Mona Romain, teacher-members of the NYC Teachers’ Retirement Board. For further information on items discussed, call your UFT borough office or the TRS.
BRONX: 1-718-379-6200
BROOKLYN: 1-718-852-4900
MANHATTAN: 1-212-598-6800
QUEENS: 1-718-275-4400
STATEN ISLAND: 1-718-605-1400
Teachers’ Retirement System: 1-888-8NYC-TRS (692-877), www.trs.nyc.ny.us.
| Total Return (%) | ||||
| 6 Months | 1 Year | 5 Years | 10 Years | |
| Fixed Dollar Annuity | 4.04 | 8.25 | 8.25 | 8.25 |
| (Diversified Equity Fund) Russell 3000 Standards & Poor's 500 Morningstar All Equity Funds Average |
-31.09 -29.52 -28.48 — |
-38.15 -37.31 -37.00 -36.25 |
-1.58 -1.95 -2.19 -1.68 |
-0.29 -0.80 -1.38 1.39 |
| (Stable Value Fund) 90-day Treasury Bills 2-Year Treasury Notes |
1.83 0.85 5.44 |
4.01 2.06 7.81 |
3.88 3.25 4.22 |
4.45 3.45 4.73 |
| (International Equity Fund) MSCI EAFE |
-29.79 -36.32 |
N/A -43.06 |
N/A 2.10 |
N/A 1.18 |
| (Inflation Protection Fund) Barclays US 1-10 Year TIPS CPI for All Urban Consumers (Seasonally Adjusted) |
-13.76 -7.94 -2.72 |
N/A -2.47 -0.09 |
N/A 3.79 2.66 |
N/A 6.27 2.56 |
| (Socially Responsive Equity Fund) Standard & Poor's 500 |
-23.72 -28.48 |
N/A -37.00 |
N/A -2.19 |
N/A -1.38 |
Periods ending Dec. 31, 2008
Performance is annualized for periods greater than one year.
