HomeMy WebLinkAboutMissouri Local Government Employees Retirement System - Public Financial ReportFinancial
For Fiscal Year Ended June 30, 2021
Popular Annual
Financial Report
A summary of Missouri LAGERS financial, investment and statistical information for our members
Missouri Local Government Employees Retirement System
Executive Director Robert Wilson with
LAGERS Local Government Hero Winner Dan Burns and
Finalist Robyn Kaufman at the 2021 Annual Meeting
This Popular Annual Financial Report (PAFR) is a summary of Missouri LAGERS’ audited financial
statements and other information contained in Missouri LAGERS’ Annual Comprehensive Financial
Report (ACFR). The complete audited financial statements and pertinent notes can be found in
Missouri LAGERS’ 2021 ACFR. The PAFR provides summary financial information and does not
conform to Generally Accepted Accounting Principles (GAAP); the ACFR conforms to GAAP and
provides a comprehensive overview of the System’s financial and operating results. Missouri
LAGERS’ ACFR is available at www.molagers.org/financial-reports/.
What does it mean?
You may come across some
unfamiliar terms as you read
through the PAFR. Watch for the
green boxes. We have provided
brief definitions for some of those
terms.
LAGERS’ Local Government Hero Award is annually bestowed upon an outstanding
LAGERS member who has consistently acted above and beyond their call of duty in
service to making their community a better place.
Popular Annual Financial Report 2021 32 Popular Annual Financial Report 2021
Contact Us
Our vision drives all that we do.
Our vision is what we hope to achieve.
Our mission is why we exist.
Our values are beliefs we hold dear.
Table of Contents
Strength and Stability:
Letter from the Executive Director.......................3
Financial........................................................................4
Investments ..................................................................6
Membership ................................................................8
Economic Impact .......................................................9
Board of Trustees ......................................................10
Executive Team ..........................................................11
Table of Contents
Our vision is lofty, but it is
something toward which we
strive everyday.
molagers.org
myLAGERS account
members.molagers.org
/missourilagers
@missourilagers
blog.molagers.org/
573-636-9455
800-447-4334
8 a.m. to 5 p.m.
Monday - Friday
PO Box 1665
Jefferson City,
MO 65102
701 W. Main St.
Jefferson City,
MO 65101
573-636-9671
VISION
MISSION
VALUES
probenefits in the most efficient and economical manner possible, while providing superior and
fulfilling our fiduciary obligations
To provide and preserve retirement security for those dedicated to serving Missouri’s local
communities.
Excellence
Dedication Respect
A secure retirement for all.
Teamwork Integrity
Communication Accountability
Public Pension Coordinating Council
Recognition Award for Funding2017
Presented to
Missouri Local Government Employees Retirement System
In recognition of meeting professional standards forplanfundingasset forth in the Public Pension Standards.
Presented by the Public Pension Coordinating Council, a confederation of
National Association of State Retirement Administrators (NASRA)National Conference on Public Employee Retirement Systems (NCPERS)National Council on Teacher Retirement (NCTR)
Alan H. WinkleProgram Administrator
P CP CPublic Pension Coordinating Council
Recognition Award for Funding
2017
Presented to
Missouri Local Government Employees
Retirement System
In recognition of meeting professional standards forplanfundingasset forth in the Public Pension Standards.
Presented by the Public Pension Coordinating Council, a confederation of
National Association of State Retirement Administrators (NASRA)National Conference on Public Employee Retirement Systems (NCPERS)National Council on Teacher Retirement (NCTR)
Alan H. WinkleProgram Administrator
P CP C
Recognition Award for Funding
2020
Government Finance Officers Association
Certificate of Achievement
for Excellencein Financial Reporting
Presented to
Missouri Local GovernmentEmployees Retirement System
For its Comprehensive AnnualFinancial ReportFor the Fiscal Year Ended
June 30, 2020
Executive Director/CEO
Financial
Popular Annual Financial Report 2021 32 Popular Annual Financial Report 2021
On behalf of the entire LAGERS board and staff, I am proud to present this annual update to our stakeholders. Within this report you will find a snapshot of the financial, investment, and actuarial performance of the LAGERS system for the fiscal year ending June 30, 2021.
Our mission at LAGERS is to ensure we provide and preserve
retirement security for those dedicated to serving Missouri’s
local communities. We know it takes a special calling to
spend a career in public service, and these individuals work
hard, ensuring our communities grow safer and stronger
– better every day. The LAGERS team is committed to
delivering continued excellence to our membership, so they
can focus on doing what they do best.
I am pleased to report for the fiscal year ending June 30, LAGERS pre-funded ratio rose to an impressive 95.6%, placing LAGERS among the top performing public pension plans in the nation. LAGERS excellent performance can be attributed to several factors including strong investment performance, prudent management, diligent funding, and top-notch plan design. In short, LAGERS’ success is no accident.
As the system extends its exceptional performance, local government employers continue to look to LAGERS not just for
the security and stability we provide our members, but for the added recruitment and retention benefits of offering a
well-run defined benefit plan. Over the past year, LAGERS welcomed 16 new employers and I believe this growth trend
will continue as more employers face growing workforce challenges.
As the system looks toward the coming year, we remain steadfast in our commitment to deliver a premier retirement system for our members, and to be a solution for those seeking retirement security. We believe that we are always better when we work together, and are proud to collaborate with and serve the 822 local government employers and more than 70,000 working and retired public servants across the state.
As always, if you ever have any questions, do not hesitate to contact the LAGERS office.
Committed to Excellence
Robert L.
Wilson, CEBS
Executive
Director
27 Years
of Service
822
Employers
35,799
Active Members
26,929
Retirees and Beneficiaries
LAGERS Local Government Hero
Finalist Robyn Kaufman,
Executive Director
and her nominator,
Julie Elsbury,
Boone County Family Resources
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Summary of Fiduciary Net Position
as of June 30, 2019 Expressed in Thousands Financial
Plan Net Position Restricted for Benefits
as of June 30, 2021 Expressed in Billions
Summary of Fiduciary Net Position (in thousands)
as of June 30 each year
Fiduciary Net Position:
This statement reflects the balance of
the resources available to pay benefits to
members, retirees and beneficiaries and
administrative fees at the end of the fiscal year.
Investment Expenses
as of June 30, 2021
Manager Fees $195,809,281
Custodial Services 775,082
Other Investment Expenses 2,531,625
Total InvestmentExpenses $199,115,988
2% of total assets
Short-term investments $ 740,535,756
Government bonds 660,605,011
Corporate bonds 222,364,196
International bonds 800,959,964
Mortgage and asset-
backed securities 198,535,797
Domestic stocks 849,159,102
International stocks 839,598,155
Real Estate 1,132,845,763
Partnerships 3,965,649,478
Absolute return 925,282,295
Other alternative
investments 156,687,983
Total Investments $ 10,492,223,500
Investments At Fair Value
as of June 30, 2021
Assets 2021 2020 2019
Cash $ 10,779 $ 11,322 $ 13,303
Receivables and accrued income 32,097 32,509 35,648
Prepaid expenses 114 62 160
Investments 10,492,224 8,366,382 8,330,011
Invested securities lending collateral 412,242 438,645 468,802
Capital assets 7,117 5,810 5,770
Total assets $ 10,954,573 $ 8,854,730 $ 8,853,694
Deferred outflow of resources
Outflows related to pensions $ 4,450 $ 5,758 $ 5,770
Outflows related to OPEB 775 1,057 690
Total deferred outflow of resources $ 5,225 $ 6,815 $ 6,460
Liabilities
Payables and accrued expenses $ 7,661 $ 8,691 $ 9,308
Collateral for securities on loan 412,242 438,645 468,802
Line of credit 250,000 250,000 200,000
Net pension liability 825 2,325 4,818
Net OPB liability 651 1,055 449
Total liabilities $ 671,379 $ 700,716 $ 683,377
Deferred inflow of resources
Inflows related to pensions $ 3,036 $ 140 $ 380
Inflows related to OPEB 398 73 80
Total deferred inflow of resources $ 3,434 $ 213 $ 460
Net position restricted for pension $ 10,284,985 $ 8,160,616 $ 8,176,317
Financial
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Additions 2021 2020 2019
Member contributions $ 21,746 $ 20,232 $ 25,341
Employer contributions 250,378 223,366 226,206
Net investment income 2,239,761 103,959 509,105
Net securities lending income 3,809 1,591 629
Total additions $ 2,515,694 $ 349,148 $ 761,281
Deductions
Benefit payments $ 382,192 $ 356,183 $ 331,493
Refunds 2,167 2,532 2,321
Expenses 7,282 9,357 8,129
Pension expense (gain)(590)(3,294) (572)
OPEB expense 274 71 (161)
Total deductions (gain)$ 391,325 $ 364,849 $ 341,210
Change in net position restricted for pension benefits (decrease)$ 2,124,369 $ (15,701)$ 420,071
Beginning net position restricted
for pension benefits $ 8,160,616 $ 8,176,317 $ 7,756,246
Ending net position restricted for
pension benefits $ 10,284,985 $ 8,160,616 $ 8,176,317
Summary of Changes in Fiduciary Net Position
as of June 30 each year
Financial
Funding Sources
$7.3 $2.2
$382.2
70% Net
Investments
27% Employer
Contributions
3% Member
Contributions
Approximate average over last five years
(in thousands)
A winner of the LAGERS Loves Local Contest,
Tim Herrman (center) and his wife, at Crane Brewing
Company in Raytown, MO
LAGERS Local
Government Hero
Winner Dan Burns
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Outperformance in both the short-term and long-term
continued to contribute to a secure retirement for LAGERS’
members. The fiscal year ending June 30, 2021 was a good year
for LAGERS’ members and LAGERS’ Investment Portfolio. Last
year’s performance proved that LAGERS’ risk-aware investment
strategy continues to ensure LAGERS will achieve its long-
term obligations to our members and retirees. LAGERS ended
the year with a +29.5% return net of fees, outperforming the
Total Policy Benchmark by +12.7%. The performance of the
portfolio was broad based, with four of the five asset classes
outperforming its respective benchmarks. The portfolio ended
Investments
• +12.1% net of fees annualized return over three years
• +12.4% net of fees annualized return over five years
The total portfolio return exceeded LAGERS’ Total Policy Benchmark return and Assumed Rate
of Return over the 3, 5, 10 and 20 year periods. This continues to translate into downward
pressure on employer contributions and a higher funding status, creating a more secure
retirement for our members.
The Equity portfolio had a strong year as the economy began to reopen with vaccine rollouts
across the globe. Both LAGERS’ Public Equity and Private Equity managers continued to
provide robust returns as they saw increased valuations across their portfolios. Public Equity
returned +51.4% while Private Equity returned +30.7%, resulting in a +42.3% net of fees
return for the Total Equity portfolio, and an outperformance of +11.7% relative to LAGERS’
Total Equity Benchmark for the year.
The Fixed Income portfolio, while showing its diversification benefits in the market downturn
last year, lagged its benchmark in the improved markets this year. LAGERS’ Fixed Income
portfolio returned +2.2% net of fees compared to LAGERS’ Fixed Income benchmark of
+5.0%. Within Public Fixed Income, long duration assets was the largest detractor as rates
increased through the year and this detraction offset all other Public Fixed Income positive
performance. LAGERS’ Private Fixed Income portfolio largely offset the Public Fixed Income
performance with a +13.6% net of fees return for the fiscal year, outperforming its policy
benchmark by +4.0% for the year.
LAGERS’ Alpha portfolio had a positive year. The portfolio returned +12.7% net of fees while
its benchmark returned +9.1% last year. All but one Alpha manager outperformed the
benchmark, creating a +3.6% excess return for the Alpha portfolio.
Real Assets/Real Return:an investment which its value is primarily based on the ownership or utilization of a tangible asset or cash flows derived from an agreed-upon measure of tangible assets. These may also include financial assets that derive their value from a contractual claim on an underlying asset that is linked to a real or variable return component, such as a price index.Strategic Assets: an investment in which its value is primarily based on its ability to create value beyond traditional asset classes, capitalizing on market dislocations, market timing, and/or unique situations.
Brian K.
Collett, CFA, CAIA
Chief Investment
Officer
18 Years of Service
These returns were calculated by LAGERS’ custodian, Northern Trust using the time-weighted rate of return methodology.
Total Portfolio Returns as of June 30, 2021
1 Year 3 Years 5 Years 10 Years 15 years 20 Years
LAGERS Return 29.48%12.13%12.42%9.97%8.55%8.10%
LAGERS Custom Index 16.78%10.33%9.48%7.73%6.69%6.39%
Actuarial Assumed
Rate of Return 7.25%7.25%7.25%7.26%7.34%7.38%
• +10.0% net of fees annualized return over ten years
• +8.1% net of fees annualized return over twenty years
the year with a portfolio value of $10.2 billion or $143,650 per member. This one-year outperformance feeds into the portfolio’s long
term returns below:
Financial
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Asset Allocation-Asset Class
as of June 30, 2021
Alpha Equities
Fixed Income Real Assets/Return
Strategic Net Leverage
Fixed Income
28.1%
Real Assets/Return
36.0%
Net Leverage
-21.4%
Equities
39.1%
Alpha*
8.7%
Investments
LAGERS’ Real Assets/Real Return portfolio outperformed its
benchmark over the last year. The Real Assets/Real Return portfolio
returned +20.6% net of fees compared to LAGERS’ Real Assets/Real
Return Benchmark of +13.9%. The outperformance comes from
both Public and Private Real Asset portfolios, which exceeded
their respective benchmarks by +8.9% and +7.3%, respectively.
Commodity portfolios led the Real Asset/Real Return category
as those benefited from an increase in inflation driven by strong
commodity demand.
LAGERS’ Strategic portfolio also had a successful year last year
with it outperforming LAGERS’ Strategic Benchmark by +25.2%.
The primary attribution comes from the Public Strategic portfolio,
returning +56.5% for the year, compared to the benchmark return
of +10.1%. Private Strategic had a smaller outperformance of
+2.6%.
The levered allocation as of June 30, 2021 for the five main asset
classes was Alpha 11.2%, Equities 39.1%, Fixed Income 28.1%,
Real Assets/Real Return 36.0%, and Strategic Assets 9.5%. In
addition to the five asset classes, LAGERS had 11.3% allocated to
cash instruments. LAGERS’ team views risk and asset allocation
at a much more granular level that includes sub-categories that
provide a better understanding of the risks and characteristics
currently in the portfolio.
Asset Allocation - Asset Class
as of June 30, 2021
*Alpha allocation adjusted by 2.5% to achieve a volatility adjusted risk target of 8%.
Alpha portfolio: Investments that target zero market exposure and seeks to profit in
both up and down markets.
Generating LAGERS’ assumed rate of return of +7.00% in the current
environment will involve implementing our risk-aware strategy.
LAGERS’ strategy takes full advantage of the illiquid nature of
LAGERS’ long-term, perpetual, investment portfolio by having
the ability to invest in private strategies such as Private Equity,
Infrastructure, Real Estate, Aviation, Mining, Shipping, Renewables
and other strategies such as a sawmill. These private strategies
are expected to earn a premium to the public market returns,
while diversifying the portfolio and decreasing overall risk. The
asset allocation has been developed for the purpose of meeting
this assumed rate of return over the long term and through all
environments, including the current. LAGERS’ team is continuously
looking for attractive and unique opportunities to diversify the
asset base to reduce overall risk and add to the return.
The asset allocation is based on long-term goals, liquidity needs,
risks and return characteristics of asset types, costs associated
with available assets, and market conditions. Again, you can have
confidence that the risk-aware investment strategy that LAGERS
continues to use will assure that long-term obligations to our
members and retirees will be achieved.
Market
NeutralMarket
Dislocations,
Price Inequities
Commodities, Timber,
Energy, Infrastructure,
Real Estate Bonds, Private & Public
Stocks, Private &
Public Equity
Strategic
9.5%
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Membership
323 Cities19,236 Members
60 Counties8,896 Members
70 Health Agencies1,618 Members
42 Water Districts247 Members
28 Road Districts87 Members
68 Emergency Services1,098 Members
49 Libraries1,095 Members
63 Special Districts2,352 Members
57 Fire Districts1,039 Members
62 Soil & WaterConservation Districts131 Members
Employer Funded Levels
The Missouri Local Government
Employees Retirement System (LAGERS)
is the largest public pension system
in the state of Missouri for local
government political subdivisions. Each
political subdivision individually elects
to partner with LAGERS to provide
defined benefit retirement, disability and
survivor benefits for their employees.
On average, LAGERS adds 10-15 new
employers annually. In fiscal year 2021,
LAGERS added 16 new employers
increasing the total subdivisions covered
by LAGERS to 822.
Growing Pension System
Funded Level: The funded level is one of many measures used to gauge the financial stability of a pension plan. The funded level of a pension plan equals the value of assets in the plan divided by the plan’s pension obligation or liability. For LAGERS, all 801 valuated political subdivisions are valued individually, and each is responsible for its own pension obligation.
as of February 28, 2021
5-10 Years 11-15 Years 16-20 Years 21-25 Years 26-30 Years 31+Years
2021 $292 $738 $1,218 $1,790 $2,496 $3,236
2020 $306 $727 $1,276 $1,654 $2,516 $3,327
2019 $321 $726 $1,167 $1,496 $2,310 $3,126
Average Monthly Benefit Payments
Distribution by Years of Service as of June 30, 2021
100% +298 Subdivisions 37%
75%-99.9%221 Subdivisions 28%
50%-74.9%132 Subdivisions 16%
Below 50%150 Subdivisions*19%
*111 subdivisions joined LAGERS within the last 10 years.
6.5 out of 10 are
75% funded or
better!
LAGERS Local Government Hero Winner
Dan Burns and his nominator, Shane
Anderson, Battlefield FPD.
Financial
Popular Annual Financial Report 2021 98 Popular Annual Financial Report 2021
Economic Impact
LAGERS returns value to Missouri’s
communities in more ways than
one. Not only is LAGERS a tool to
help local government employers
attract and retain the best public
servants to provide services in their
communities, but approximately
93% of the benefits LAGERS pays,
stay local with retirees living in the
communities they served. These
steady monthly retirement benefits
are spent each month right back
into Missouri’s local communities,
creating significant economic
impact across Missouri!
LAGERS Annual Benefit Payments
by Congressional District
LAGERS paid out $356 million to 25,668 benefit recipients
with 93% ($332 million) staying in Missouri.
As of June 30, 2020
Update pending legislative redistricting
Photos are from our LAGERS Loves Local campaign that features our retirees shopping at their favorite local businesses. Learn more at molagers.org/lagersloveslocal.
LAGERS Loves Local
A winner of the LAGERS Loves Local Contest,
Tim Herrman (left) his wife, and the Crane Brewing
Company crew in Raytown, MO.
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The Board of Trustees
Arby Todd
Member Trustee
City of Lee’s Summit
Term Expires 12-31-2021
J. Robert Ashcroft
Employer Trustee
Platte County
Term Expires 12-31-2021
Joan Jadali
Member Trustee
Chairperson
City of Town & Country
Term Expires 12-31-2022
Claire West
Citizen Trustee
Term Expires 12-31-2021
Barry McCullough
Employer Trustee
Vice Chairperson
City of Gladstone
Term Expires 12-31-2022
Sandy Walker
Member Trustee
City of Poplar Bluff
Term Expires 12-31-2024
From Left: Frank Buck, Arby Todd, Joan Jadali, Barry McCullough, Sandy Walker, J. Robert Ashcroft, Claire West
Frank Buck
Employer Trustee
Dekalb County
Term Expires 12-31-2024
The Board’s principal role is to ensure that LAGERS is appropriately governed and managed. The overriding
goal of the Board is to serve the best interests of members and beneficiaries and to protect the assets of
the system. Trustees set strategy and policy and delegate the day-to-day management of the retirement
system to staff. The LAGERS’ Board of Trustees is made up of three elected Member Trustees, three elected
Employer Trustees, and one appointed Citizen Trustee.
• The three Member Trustees must be active employee members of LAGERS and are elected by a vote of
the members at the LAGERS’ Annual Meeting.
• The three Employer Trustees must be active officers or officials of a LAGERS’ participating employer and
are elected by a vote of the officers and officials at the LAGERS’ Annual Meeting.
• The one Citizen Trustee is neither an active member or employer official and is appointed by the
governor.
Financial
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From Left: Melissa Rackers, Tami Jaegers, Pam Hopkins, Robert Wilson, Jason Paulsmeyer, Brian Collett, Jeff Kempker, Sheila Reinsch
Robert Wilson,
CEBS
Executive Director
Brian Collett,
CFA, CAIA
Chief Investment Officer
Melissa Rackers,
CPA, CGFM, CEBS
Chief Financial Officer
Jeff Kempker,
CEBS, CRC
Asst. Director, External
Affairs
Tami Jaegers,
RPA
Asst. Director, Operations
Pam Hopkins,
CPA, CIA, CRMA, RPA, CGFM,
Compliance Officer / Internal Auditor
Jason Paulsmeyer
Chief Counsel
The Executive Team
Sheila Reinsch
Board and Executive
Coordinator
The LAGERS’ team brings over 150 years of combined pension administration experience helping to ensure
that every local government worker in Missouri can count on us to deliver a world class retirement system.
Missouri Local Government Employees Retirement System
701 West Main St., PO Box 1665, Jefferson City, MO 65102