In addition to comparing the actual returns of the fund to the Required Return Objective, the board also compares fund returns to the following three benchmarks: the MOSERS' Policy Benchmark, the MOSERS' Strategy Benchmark and, to a lessor extent, the median return generated by a peer group of public pension funds.

Policy Benchmark
The Policy Benchmark provides an indication of the returns that would have been achieved (excluding transaction costs) by a portfolio invested passively in the sub-asset classes with percentage weights allocated to each sub-class in MOSERS Total Fund Policy Allocation. The difference between the Required Return Objective and the Policy Benchmark is a tool for evaluating the quality of the broad allocation policy decisions made by the board.

Strategy Benchmark
The Strategy Benchmark provides an indication of the returns that would have been achieved by a portfolio invested passively in the sub-asset classes with percentage weights allocated to each sub-class based on the Actual Allocation of the MOSERS fund. In other words, this benchmark will incorporate decisions made by the Chief Investment Officer to position the portfolio away from the Total Fund Policy Allocation. By comparing the strategy benchmark with the policy benchmark, the board will, overtime, be able to judge the success or failure of the decisions by the Chief Investment Officer in making these strategic decisions.

The graph above shows total fund return comparisons for 1-, 3-, 5-, and 10-year periods. Strategy benchmarks were not clearly defined prior to 1995, which was when MOSERS formally adopted strategic biases.

The required rate of return is what the portfolio must generate in order to fund the liabilities per the actuarial assumptions being made. In MOSERS case we must earn 5% after inflation in order to fund our liabilities with no increase in the contribution rate.

The Independent Consultants Cooperative (ICC) median public fund return reflects a universe of public pension plans with assets in excess of $1 billion. While it is not formally used in the evaluation process, it is sometimes helpful to see how our returns compare to our public pension fund peers.