SDRS investments tick up amid volatile markets
PIERRE, S.D. (KELO) — The South Dakota Retirement System's investments have rebounded a bit.
The estimated return, covering the 11 months through May 31, was 3.2 to 3.7%, senior portfolio manager Darci Haug told SDRS trustees on Wednesday.
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The annual target, however, is 6.5%. Whether that can be reached by June 30 isn't known.
'We aren't keeping up with the markets because of our conservative positioning,' portfolio manager Danielle Mourer explained.
The South Dakota Investment Council oversees the SDRS portfolio. The council over the long term has taken a contrarian approach, holding larger amounts of cash at times when the market is, in the council's estimation, overpriced.
That's how the council currently sees the markets. Nonetheless, being back in the black was an improvement over the April 9 report to the SDRS trustees.
On that date, SDRS investments as a whole were down between 3 and 3.5%. The very next day, they had regained some of that lost value and were down 0.5 to 1%.
Jarrod Edelen, another of the portfolio's managers, said earnings by different sectors have been volatile of late and varied widely. Technology investments such as computer chips were recently up 27% while energy investments overall were down 7%, he said.
The fair market value of SDRS investments was $15 billion as of May 31, Haug said.
How the SDRS investments fare year to year largely determines the size of the annual cost of living adjustment paid the following year to the system's retirees and other beneficiaries.
SDRS senior actuary Doug Fiddler told the board that the COLA taking effect on July 1, 2025, will be 1.71%. That was calculated using the third quarter 2024 inflation rate of 2.49%.
Fiddler estimated that a 3.5% annual return for fiscal 2025 would result in a COLA of approximately 1.4% taking effect on July 1, 2026.
He said benefit payments to approximately 80% of SDRS retirees have been falling short of keeping up inflation by about 10%.
Fiddler presented a chart showing the S&P 500 has been in a volatile stretch lately, dropping about 20% in April and gradually rebounding since then.
Fiddler said that he had planned to brief the trustees on corrective actions that might be necessary when the SDRS investments were in the red for the year. But he changed his mind after seeing the number get back into the black.
SDRS executive director Travis Almond spoke about market volatility to the board after Fiddler's presentation.
'So who knows how the end of this fiscal year lands,' Almond said. He suggested that the trustees keep themselves familiar with the corrections plan.
'I have no doubt we're going to have that conversation. It's a question of when,' Almond said.
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