Actuaries recommend holding PERS assumed investment return at 7% citing cash‑flow sensitivity

CAVAC presented the actuarial and investment analysis to the administrative committee and recommended the system maintain a 7.0% assumed rate of return. The consultant noted that the recommendation is forward‑looking and consistent with peer surveys and capital market assumptions.

Ed (CAVAC) said the 7% assumption aligns with the Horizon survey and KALEN’s forward‑looking capital market assumptions when applied to PERS’s asset allocation. He emphasized that PERS’s negative non‑investment cash flow makes the system more sensitive to market volatility, and that increasing the assumption would require accepting more investment risk. "Our recommendation to the board is to continue at the 7% level," the presenter said.

Board members asked about peer positioning and the potential need to rebalance the portfolio if the assumption were raised. CAVAC and investment staff responded that higher assumed returns would typically require a higher risk profile and adjustments in asset allocation. The committee received supplemental letters from two independent actuarial firms (GRS and Chiron) that also characterized 7% as reasonable for PERS given current circumstances. No formal vote was required on the assumption at this meeting; staff provided the materials for future board consideration.