Secure your future

TRS investments soared in 2012

TRS walk-in center back in business

Since Monday, Feb. 4, the staff of the TRS Walk-In Center, Call Center and Mail Room has been back at 55 Water St., 2nd Floor. You may submit your retirement application and any other TRS-related forms at that location on that date. TRS forms will no longer be accepted at BERS.

The year 2012 was a strong one for investments worldwide. U.S. stocks were up more than 16 percent and international stocks nearly 18 percent.

In the U.S. markets, the strength was broad-based, as small-, mid- and large-capitalization stocks all did well.

In the international markets of the developed world, all regions earned double digits with the exception of Japan, which earned 8.4 percent. The emerging markets also performed well.

The stable/declining interest rate and a stable credit outlook resulted in the U.S. bond market also performing well this past year.

An asset class that did not do well was cash (short-term, nonvolatile fixed-income investments). Returns on 91-day Treasury bills earned a paltry fraction of 1 percent.

In keeping with the overall up market, the union’s pension fund (which is the reserve fund used to pay for our pensions) earned a very healthy 13.5 percent rate of return.

That is quite high in comparison with the performance of other pension funds. Pension funds are typically diversified for security, so while not delivering what the height of the stock market can, they are more stable investments.

The UFT pension fund held about $46.5 billion at the end of the year, a gain of $5.2 billion for the year.

This increase in funds came after paying out about $3.5 billion in pension benefits for the year. With that increase, the Teachers’ Retirement System had the largest reserve fund in its history.

The year helped us to make up for some of the losses suffered in 2000, 2001, 2002 and 2008, which were caused by the manipulations of investment markets by financial professionals, most of whom have yet to be punished.

The pension fund is invested in a well- diversified group of asset classes that includes:

  • domestic stocks
  • international stocks
  • fixed income
  • private equity
  • real estate
  • economically targeted investments

Variable Anuity chart

TDA investments

Members can invest their Tax-Deferred Annuity funds in various programs [results of the investments over different periods can be viewed in the box below]. Review the choices available, and make your decisions based on your own goals and tolerance for risk. As always, bear in mind that past results are not a guarantee of future outcomes.

Fixed Return Fund — Co-invested with the pension fund, with an allocation of about 70 percent in equity investments and 30 percent in fixed-income investments. The crediting rate is set at 7 percent per annum.

Diversified Equity Fund — Invested in a broadly diversified portfolio of domestic and international stocks. There is a built-in defensive strategy segment. The objective is to achieve a rate of return comparable to the return of the broad stock market.

Bond Fund — Invests in a portfolio of high-quality bonds, which may include TreasuriesAP styleAp style (fixed-income investments fully backed by the U.S. government) and bonds that are from corporate, government agency, mortgage and other types of fixed-income instruments. The objective is to seek current income from a diversified portfolio of high-quality bonds. This fund is now one year old.

International Equity Fund — Invests primarily in the stocks of non-U.S. companies, including emerging as well as developed nations’ markets. The 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. equity markets.

Inflation Protection Fund — Invests in the multiple asset classes such as fixed income securities like Treasury Inflation Protected 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.

Socially Responsive Equity Fund — Invests in an actively managed portfolio of large and middle-sized U.S. and non-U.S. companies. These companies show leadership in such areas as:

  • environmental concerns
  • workforce diversity
  • progressive employment and work- place practices
  • public health

This fund does not invest in companies that manufacture arms. The objective is to achieve long-term capital growth while avoiding investments in companies that receive a significant portion of their revenues from weapons, alcohol, tobacco or nuclear power.

Total returns (%) for Tax-Deferred Annuity programs

Making an investment switch

If you want to make an investment switch beginning on April 1, be aware that the Teachers’ Retirement System must receive your application for change before the end of February.

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