PERS: Q1 market swings cut MDC value; diversification, low fees limit damage

Representatives from Callan gave the Public Employees Retirement System of Mississippi Investment Committee a quarterly market update, saying the MDC (Mississippi Deferred Compensation) program and the Optional Retirement Plan (ORP) saw mixed returns and net outflows in the first quarter.

Alex, Callan representative, said domestic equities weakened late in the quarter amid tariff concerns and large‑cap growth and small‑cap stocks bore much of the selloff. "The S&P 500 had its worst quarter in a couple of years," Alex said, noting the index was down just under 5 percent for the quarter.

The Callan presenters said diversification limited losses. International equity, fixed income and stable value options were positive while U.S. equity segments declined, and target‑date funds with heavier fixed‑income allocations produced positive returns. John, Callan performance lead, reported the total fund for the system recovered in May, with total fund assets at about $35.1 billion and fiscal year‑to‑date returns in the high single digits.

Callan highlighted fees and implementation as stabilizing factors for participant outcomes. Alex said the dollar‑weighted net expense ratio for the MDC was about 25 basis points, materially below a marketplace benchmark of roughly 80 basis points and saving participants an estimated $14 million a year at current asset levels.

Speakers emphasized time horizons and portfolio construction. "This follows two years when the S&P was up about 25 percent each year," Alex said, urging a long‑term perspective. Callan staff noted target date funds and stable value offerings acted as anchors, and private real estate in ORP (non‑listed) will respond more slowly than listed REITs in the MDC.

The committee asked several questions about real estate performance, Fed policy and geopolitics; Callan said real estate has been challenged over multi‑year horizons but listed REITs recently performed better and private real estate is appraisal‑based and slower to record gains or losses.

Why it matters: The update framed recent short‑term market volatility as part of a longer cycle and flagged areas that protected participant balances — fees, allocation and stable‑value exposure. The board will use this context for ongoing monitoring of the MDC and ORP platforms.

Less critical details: Callan reviewed manager rankings, noting most managers beat benchmarks over three‑year windows, and called out Loomis Sayles' turnaround in large‑cap growth within the MDC.