By Otto Fajen
Trustees present
Beth Knes, Chair
Chuck Bryant, Vice Chair
Allie Gassman
Dr. Nate Moore
Dr. D. Eric Park
Amanda Perschall
Katie Webb
SYSTEM OPERATIONS
The Board meeting started at 9:00 a.m. The Board approved the minutes from the December 16, 2024, meeting. The Board certified the election of MNEA member Amanda Perschall to the Board to serve the remaining year of the term vacated last year by Dr. Jason Steliga. The Board also established the order of business.
INVESTMENTS
Investment Performance Report - Craig Husting (PSRS staff) and Michael Hall (Russell) reviewed the December 31, 2024, investment update and provided the most current information. The calendar year 2024 was another good market year for both stocks and bonds. The one-year PSRS/PEERS investment return is 10.4% while the fiscal year return (July 1, 2024, through December 31, 2024) is 3.64%.
Husting discussed the current asset allocation of the PSRS/PEERS portfolio, and reviewed the long-term strategy, portfolio themes and the broad portfolio expectations. The Systems continue to manage total assets with less risk and more return than other comparable plans over all periods of one year or longer. Husting discussed the differences in timing and performance of public and private equity investments.
Anti-Terrorism Policy - Mr. Husting reviewed the Systems’ Anti-Terrorism and Economic Sanction Investment Policy. The Policy requires PSRS/PEERS staff to provide a report to the Board on an annual basis that identifies any investment actions taken due to links to terrorist or sanction-related activities. No action by the Board was needed.
Affirmative Action Policy - Mr. Husting reviewed the Systems’ Affirmative Action Policy and Procurement Action Plan. The Policy requires PSRS/PEERS staff to provide a report to the Board on an annual basis regarding the Systems’ efforts to assure equal opportunities for minorities and women as money managers, brokers, and investment counselors. The Systems are complying with the policy. No action by the Board was needed.
Safe Assets Program Review – Mr. Craig Huston and Mrs. Jessica Wilbers (PSRS staff) reviewed the Systems' Safe Assets portfolio including program objectives, guidelines, and long-term results. The 15-year annualized return for the Safe Assets composite for the period ended December 31, 2024, was 1.65%.
Economic Overview – Mr. Stephen Douglass and Mr. Derek Lohse from NISA Investment Advisors presented an economic overview to the Board. The Fed has been lowering interest rates since September 2024, and long-term Treasury yields have increased. Investor surveys estimate the likelihood of a recession has fallen since early 2023. NISA suggests that this is due to reversal of the pandemic supply shock, loose fiscal policy, and an immigration surge over the last several years. The trend of low unemployment despite budget deficits under President Biden is expected to continue into the current administration. President Trump promised to raise tariffs to 20% overall and 60% for China, which would raise U.S. Tariffs to the highest levels since the Smoot-Hawley tariffs of 1930. If enacted, these tariffs are expected to slow economic activity. The post-COVID immigration surge peaked in December 2023 and has fallen since Biden executive actions in June 2024. Inflation is slightly above long-term expectations and is expected to fall to 2.69% by June 2025.
MANAGEMENT REPORT
Set Meeting Dates – The Board voted to designate meeting dates for the rest of calendar year 2025, including August 25, November 3, and December 12, 2025.
Strategic Plan Timing - The Board voted to delegate to the PSRS staff committee the authority to approve the Request for Proposal (RFP) for the Board election.
Legislative Update – Mr. Mike Moorefield (PSRS staff) government relations consultant Mr. Doug Nelson presented the February legislative update. Mr. Moorefield and Mr. Nelson gave the Board an overview of the governor's fiscal year 2025 budget recommendations and discussed the DESE budget.
Governor Kehoe favors eliminating the personal income tax and will create a task force that will consider rewriting the school funding formula. His budget is $300 million short of full formula funding while also diverting $50 million to the private school voucher program.
The legislative report addressed the investment mandate bills that could impact the Systems. HB 577 (Barry Hovis) would mirror PSRS/PEERS policy on divestments of fund holdings in certain Chinese entities or products. HB 657 (Bill Owen) would mirror PSRS/PEERS policy regarding proxy voting and fiduciary investment priority. Neither bill would have financial impact to the Systems.
The report also provided an analysis of the several pieces of legislation that would amend the Systems' statutes. HB 712 (Brad Pollitt), HB 965 (Wick Thomas) and HB 1039 (Stephanie Boykin) would extend the substitute waiver for PSRS retirees. SB 474 (Maggie Nurrenbern) would create a 2.6% benefit factor for 33 or more years of PSRS service. HB 329 (Willard Haley) would increase the PSRS lifetime COLA cap in certain years with high inflation. The Systems will provide for an actuarial analysis of these changes to the Systems.
Year in Review (Areas of Impact) - The report reviewed various projects undertaken by the Systems throughout calendar year 2024. The report mentioned key projects and impacts affecting five primary areas: members and employers, staff, investments, Board members and government relations.
Current CPI-U Update – The Board reviewed CPI-U data. The current fiscal year CPI-U is .46 % through December 31, 2024. Under current policy, when the final CPI-U for a fiscal year is between 2.0% and 5.0%, the Board will make a COLA for eligible retirees of 2.0%. When the CPI-U is between 0.0% and 2.0%, the Board will make a COLA for eligible retirees of 2.0% when the cumulative CPI-U growth reaches or exceeds 2.0%.
Public Comment – There was no public comment.
The public meeting adjourned, and the Board went into closed session at 12:07 p.m.
Find past reports at www.mnea.org/psrs.