Montgomery County retirement fund posts 16.45% return in 2025; COLA still limited by 2022 losses
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Summary
A consultant told the Montgomery County Retirement Board the fund earned 16.45% in 2025 and rose to about $752 million, but the board remains below the actuarial threshold needed to grant a cost-of-living increase because 2022 losses remain in the five-year averaging window.
A consultant presenting to the Montgomery County Retirement Board said the retirement plan produced a 16.45% gross return for 2025, raising the fund’s market value from $652,000,000 at the end of 2024 to about $752,000,000 by year-end. “You can see that the plan earned 16.45%,” the presenter said, noting the plan had its best return since 2019 and that year-to-date gains for the 2025 calendar year totaled $106,000,000.
The presenter highlighted diversified gains across asset classes: domestic equities led returns aided by AI-related gains, international equities and emerging markets outperformed their benchmarks, fixed income returned 8.3% year to date, and alternatives added roughly 11.5%. The consultant said active management added approximately 4% of additional value versus the benchmark and cited exposure to emerging-market debt, high-yield bonds and special-situations strategies as contributors.
Board members pressed on how the 2022 market downturn affects benefit adjustments. The consultant noted the plan still carries a large negative 2022 return in its five-year averaging window and said that keeps the funding ratio under the roughly 80% threshold actuaries use to permit a cost-of-living adjustment (COLA). One commissioner summarized the constraint, saying the board is “still 2 years out” in actuarial projections before the plan could reliably exceed the threshold; the presenter agreed that continued strong returns would help but cautioned about geopolitical or other shocks.
The consultant said the board reviewed asset allocation in August 2024 and again in 2025 without changing it, and recommended revisiting the investment policy statement in 2026. No formal vote or change to the investment policy was taken at the meeting; the board directed staff to continue monitoring performance and to schedule the IPS and asset-allocation review for upcoming meetings.
What’s next: the board will revisit the investment policy statement and asset allocation in 2026 and monitor whether future returns remove the 2022 drag from the five-year averaging calculation, a necessary step before a COLA could be restored.