Mercer CFA Institute Global Pension Index ranked the U.S. retirement system 29th of 48 countries.
* The Kansas Public Employees Retirement System (KPERS) reported strong returns for fiscal year 2025, despite market fluctuations.
* KPERS’ portfolio reached $29.3 billion, exceeding expectations and benchmarks.
* Financial advisors cautioned the KPERS Board of Trustees about potential risks and uncertainties to future performance, including trade wars and national debt.
* While the U.S. economy remains resilient, experts warn that the impact of tariffs and other challenges may not have fully materialized.
After large dips in the stock market in 2025, the Kansas public pension system ended the fiscal year with strong returns.
The Kansas Public Employees Retirement System had about $29.3 billion in assets when fiscal year 2025 ended on June 30.
Despite the significant gains, financial advisers told members of the KPERS Board of Trustees during meetings July 24 and July 25 in Topeka of risks and uncertainties to future investment performance.
KPERS investment portfolio records strong performance
Chief investment officer Bruce Fink told the board the portfolio’s value was about $29.3 billion at the end of the fiscal year, based on preliminary numbers.
“The one-year return as of June 30 was approximately 10.4% … this is very solid returns in fiscal year 2025,” Fink said. “So we’re happy to be able to report that.”
KPERS recorded three-year returns of 9.2%, five-year returns of 9.4% and 10-year returns of 7.7%. The returns since inception are 8.4%. Fink said that is “very solid long-term performance” and “we are outperforming the actuarial assumed rate of return.”
Fink said KPERS is “outperforming the benchmark” across most asset classes, especially the actively managed ones.
In the last month of the fiscal year, the fund’s value increased about $550 million. State Treasurer Steven Johnson, who serves on the Board of Trustees, called the May to June increase “a pretty good bump” and “great news.”
“As we have seen in the performance reports,” said Aysun Kilic, a consultant and portfolio strategist at Meketa Investment Group, “your long-term performance has been very strong. … Long-term is what really drives the performance of this portfolio and helps the portfolio grow, and you have some really good numbers.”
Despite gains, risks and uncertainties remain
Kilic said the U.S. economy has been “remarkably resilient,” pointing to GDP growth and declining inflation.
Kilic said market volatility, especially in April due to tariffs, is a reminder of the benefits of portfolio diversification.
“In this environment, there’s a lot of news, a lot of volatility, uncertainty,” Kilic said. “Why is this all relevant for KPERS and the board? Well, it can be hard to make decisions.”
Francesca Fornasari, of Insight Investments, addressed the KPERS board on changes affecting the markets.
“There is a lot of uncertainty out there, and whatever degree of margin of error that you’ve baked into your forecasts and your allocation should probably be larger,” Fornasari said.
Fornasari expects slower economic growth in the U.S. and globally.
“Given everything that we’ve talked about in terms of uncertainty and structural issues, it’s quite remarkable that … growth is actually still pretty decent,” she said. “There’s a narrative in the markets that basically says you’ve had a lot of stuff thrown at the U.S. economy … but the global economy is still pretty resilient.”
She cautioned against interpreting that resiliency to mean the challenges don’t matter. She pointed to the last trade war in 2017 and 2018, which was smaller than the 2025 trade war.
“The time between the moment in which the tariffs started to go up and the moment you started to see it in the numbers was quite lengthy … it took about eight months for global trade to actually respond,” she said. “When it did, it responded quite aggressively.
“In many ways, it feels as though we’re in the eye of the storm where everything looks relatively good, but we haven’t been hit by whatever sort of the impact and the fallout of some of the trade issues. So whilst we’re encouraged by the fact that the global backdrop is still pretty benign, I don’t think that necessarily means that we are in the clear.”
Fornasari said inflation measures would be encouraging if not for the tariffs, which complicate the inflation picture and have made the Federal Reserve more cautious about cutting rates. She said immigration policy could have “a negative impact on growth” and “could make the Fed’s job of cutting rates more difficult.”
What the Big Beautiful Bill means for Kansas public pension system
Fornasari said issues around the national debt “are going to increasingly come to the fore.”
“If you look at the fiscal position of the U.S., it can be deemed to be unsustainable,” Fornasari said.
Of importance to KPERS investment managers, the U.S. fiscal situation “runs the risk of actually impacting the market.” She said “the market has started to care,” reflected in the bond yield and term premium on treasury bonds.
“This effectively gives you a signal or an indication of how much the market needs to be compensated by to take the risk of lending money to the U.S. government,” Fornasari said.
She said the country’s fiscal policy has now been set because of major budget legislation passed by Republicans in Congress and signed by President Donald Trump.
“The One Big Beautiful Bill has effectively locked in the current fiscal status for the next 10 years,” Fornasari said. She said that policy means “the debt to GDP (ratio), which is currently roughly 100%, is likely to go up to as much as 127% of GDP — and that is almost entirely locked in — without even taking into consideration the fact that there may be over the next 10 years a recession.”
She said it is relevant to the market and especially the bond market, and “I think it’s also going to have an impact on overall policy and overall economic growth.” The OBBB is projected to result in the federal government’s debt service plus military spending taking as much as 22% of revenues, “which is a very substantial amount.”
Other countries are also fiscally challenged, she said.
“It’s a completely fair point to say that the U.S. is not unique in terms of having a challenging fiscal position, but there are a few things that make the U.S. particularly vulnerable,” she said.
She pointed to the U.S.’s higher financing needs than other countries, as well as the U.S. having a shorter average maturity of debt. That shorter length matters, she said, because it means the U.S. is more vulnerable to higher interest rates.
Trade war could hurt American companies
Fornasari said Trump’s trade war creates uncertainty.
“The trade wars of 2025 have been a pretty notable step-change in direction in terms of global trade, and they’ve led everybody to wonder and start to believe that we’ve passed a sort of peak of globalization,” Fornasari said.
The average tariff has gone from about 2% to over 12%, she said. While “there’s a lot of different things that are still being discussed in terms of tariffs” and deals may be made, the “general consensus is that they’ll go up to around 13% or so, that it’s unlikely to go down.”
“U.S. companies have been huge beneficiaries of that globalization,” Fornasari said, citing corporate earnings from abroad, which could be affected by trade policy.
Less exceptional American assets, and AI revolution
Fornasari said there is an uncertain outlook for the exceptionalism of U.S. assets, in part due to artificial intelligence.
“It’s undeniable that U.S. growth on average in the last 40 years has been significantly higher than that of the rest of the world,” she said. “It’s also undeniable that U.S. assets have performed far better than those of the rest of the world.”
She said the U.S. has benefited from “advantageous interest rates” compared to other countries, and “innovation, commercialization, cheaper funding leads to much stronger earning generation, faster growth.”
But U.S. exceptionalism could be hampered in the future by government policies, including ones affecting policy volatility, trade, tighter immigration and public funding cuts to research and development.
Fornasari said AI technology has seen a “huge” investment, which “will drive improvements in productivity,” but “there are parts of how this is likely to unfold that we don’t fully understand.” That could include higher unemployment, especially among young adults.
“It’s quite messy … there’s a huge amount of uncertainty,” Fornasari said of the future of equity markets. “We’ve been through this incredible period of U.S. outperformance and equities trading at a premium. Our view is that that premium is likely to shrink.”
She said that “doesn’t mean that the U.S. becomes unexceptional. It just means that it’s probably a little bit less exceptional than it was before.”
“There’s a lot of changes that really go to the factors that have underpinned a lot of that U.S. exceptionalism,” she said.
Jason Alatidd is a Statehouse reporter for The Topeka Capital-Journal. He can be reached by email at [email protected]. Follow him on X @Jason_Alatidd.
