CARSON CITY – Nevada’s Public Employees’ Retirement System earned an estimated 2.9 percent return on its investments in the fiscal year ending June 30, and is now valued at $25.8 billion, an official with the plan said today.

The 2012 return is below the 8 percent anticipated annual return for the system’s investments over the long term.

While well below the record 21 percent return in Fiscal Year 2011, and the 10.8 percent return in Fiscal Year 2010, the 2012 gain will be in the top 20 percent of performers for large public pension plans for the year when adjusted for risk, said Dana Bilyeu, executive officer of PERS.

“So as far as looking at all of the big institutional investors across the country, we’re quite competitive with that kind of return,” she said. “In fact I think it’s going to be one of the top performing funds in the nation. You can only get what these markets are going to give you.”

Dana Bilyeu, executive officer of the Public Employees' Retirement System

The three years of positive returns follow a 15.8 percent loss in 2009.

A final report on the year’s performance will be presented to the board overseeing the plan in August.

The estimated returns are after fees are paid to the investment managers overseeing the retirement funds on behalf of the nearly 100,000 state and local government employees and 41,000 retirees participating in the public pension plan as of June 30, 2011.

“When you talk to the investment professionals, I think most of them would say that what we’ve sort of taken here is a pause in what has been a very large increase in the overall equity markets over the last couple of years,” Bilyeu said. “So maintaining a positive return, maintaining the corpus of the trust, and really just pausing I think is what you see happening here. And that’s what I sort of think this particular fiscal year was.”

The uncertainty over the presidential election is partly responsible for the lackluster equity market, she said.

Over 28 years, the average return for the plan is 9.2 percent after fees have been paid, above the 8 percent assumed return. Some critics of the state’s defined-benefit public pension plan say the expectation of an 8 percent long-term return is overly optimistic given the volatile markets of the past decade.

The plan was only 70.2 percent fully funded at the end of fiscal year 2011, a level below the minimum 80 percent some experts say is the best measure for a healthy plan. The long-term unfunded liability equated to $11 billion as of June 30, 2011. The funding ratio through 2012 will be reported to the board in November.

Some estimates put the unfunded liability at much higher levels based on a different type of analysis.

The Pew Center on the States said in June the financial health of Nevada’s public employee pension plan is cause for serious concern because it is below the 80 percent benchmark that fiscal experts recommend for a sustainable program.

Bilyeu argues that a better measure of the health of a pension plan is whether it is being funded each year at the levels recommended by an independent actuary, which is the case for the PERS plan. Not all public pension plans across the country are funded annually to the recommended levels, she said.

Nevada Gov. Brian Sandoval is advocating for a change to the pension plan for future workers from a defined benefit to a 401(k)-style defined contribution plan. Defined contribution plans eliminate any future unfunded fiscal liability for states. The 2011 Legislature took no action on the issue but it is expected to resurface in 2013.

The PERS fund is currently invested 35 percent in bonds and 65 percent in equities and other “risk exposed” investments.

“Over the long haul we remain very, very committed to the investment strategies we have,” Bilyeu said. “We’re in it for the long haul.”

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Audio clips:

Dana Bilyeu of PERS says equities took a pause in Fiscal year 2012:

071112Bilyeu1 :33 fiscal year was.”

Bilyeu says the 2.9 percent return will be among the best performing large institutional funds for 2012 after being adjusted for risk:

071112Bilyeu2 :10 in the nation.”