A new primer released this week by the National Institute on Retirement Security gives an overview of the public pensions investment process, which has garnered increased attention in the wake of economic shocks that recently have impacted all investors.

The primer, co-authored by Ronnie Jung, CPA, who previously served as executive director of the Teacher Retirement System of Texas, and Nari Rhee, PhD, manager of research for the National Institute on Retirement Security, looks at how public pensions allocate assets and set expected rates of return, including:

  • Distribution of investments across stocks, bonds, and other asset classes to maximize returns and minimize risk.
  • Principles that guide how public pension funds invest and the institutionalized practices through which plan trustees set investment policies.
  • Evaluation and management of investment related risk.
  • Investment return assumptions among public pension funds in comparison to historical performance and the future outlook.

"We developed this issue brief to provide interested policymakers, journalists, and citizens with a basic understanding of how a public pension system manages its investment," said Diane Oakley, NIRS executive director. "Public pension funds currently hold some $3 trillion in assets under management that provide retirement security for some 19 million workers. So it's critical that stakeholder have access to an accurate overview of the process including key players, investment policies, risk management, and rate of return assumptions. We hope this primer becomes the 'go-to' tool on public pension investments."

The primer offers four key highlights:

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