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PRB: investment returns improving overall but four plans flagged for high assumptions; board adopts evaluation schedule under HB3474
Summary
PRB staff said most systems' 10-year net returns have improved toward 7%; staff asked four plans using 7.75%+ return assumptions to provide capital-market assumptions and asset allocations. The board also prepared to adopt an investment-practices evaluation schedule required by recently passed HB3474, with the next cycle due June 1, 2027.
PRB investment staff told the board on Wednesday that most Texas retirement systems posted improved 10-year net returns in 2024 and that investment expenses for the majority of systems are near or below national averages.
"The majority of systems have had a good year as far as 2024 is concerned with their investments," Robert Munter, PRB investment analyst, said. He said many systems' 10-year net returns are now consolidating around the 7 percent level and that most systems are within about one percentage point of their investment return assumptions.
Munter flagged four systems that still use investment return assumptions at or above 7.75 percent (Harlingen, Big Spring, Orange and San Angelo) and asked staff to request detailed capital-market assumptions and asset-allocation information from those plans. He said the PRB will collect more quarterly liquidity and risk metrics from systems that publish them and may reach out to individual plans for additional data.
On governance, Munter summarized changes required by House Bill 3474 and the related investment-practices evaluation requirement (IPPE). Under the adopted guidance, systems with $100 million or more in assets must perform an evaluation every three years; systems with $30 million to $100 million must do so every six years. PRB staff said it will use each system's assets as of Dec. 31 of the prior year (Dec. 31, 2026 for the next cycle) to determine which systems must report and that the next cycle's reports are due June 1, 2027.
Munter said PRB staff will email updated guidance to systems, collect feedback and present a finalized schedule for board adoption at the December meeting. Board members asked staff to obtain specific capital-market assumptions and asset-allocation details for the four flagged plans so the agency can advise on the reasonableness of long-term return assumptions.
