Message from the CEO

“Your YMCA Retirement Fund has persevered in the face of economic turmoil… It has always emerged stronger, having adapted every time, and FY17 was one of these restorative years.


2017 Annual Hihglights 

I am pleased to report that this was a restorative year investment-wise for your YMCA Retirement Fund.

In fiscal year 2017 your Fund bounced back, following up on a very difficult and disappointing prior year. Our net investment returns were consistently strong in absolute terms, and we also outperformed our benchmark in relative terms for the fiscal year ended June 30, 2017. Looking back over longer time periods, we see that the strong results for the year also improved our comparative performance.

Investment Returns as of June 30, 2017 (Net of all Investment Costs)

Investment Returns

Our Mission and Guiding Principles
Guiding Principles

The Fund’s primary focus is to protect participants’ account balances during their active working careers and then provide an uninterrupted stream of annuity payments throughout their retirement years. Our three Guiding Principles summarize our ongoing efforts to deliver on our mission — to empower YMCA employees to achieve economic security, resulting in loyalty to the YMCA Movement:

  • Partner with participants to provide attractive benefits, resulting in a lifetime annuity as a reward for loyalty to the YMCA Movement

  • Maximize the confidence and satisfaction of our Participants, Retirees and YMCAs as employers

  • Ensure an adequate funding level to perpetuate the safety and longevity of the plans

Savings for Life, Income for Life

The strong investment returns for the year boosted our funding level to 97% (assets as a percentage of liabilities). When combined with other factors, this gave our Trustees the confidence to declare 4% interest credits for the period of July to December 2017.

It may be tempting to question 4% interest credits at a time when we see headlines about the strength of US public equities. However, as we pursue our strategy to structure a highly diversified portfolio, we allocate only 20 to 25% of our investments to US public equities. Please read the Report from the CIO for more detailed comments about our asset allocation and investment performance.

The green bubbles in the accompanying diagram are the five factors that influence the thinking of Fund Management and our Trustees when making semiannual interest credit decisions.

Interest Credit Diagram

Our plans are structured to reward longer-term participants with the exceedingly beneficial 7% annuity conversion rate when they retire and convert their account balances (savings for life) into monthly payments (income for life). We mean it when we say that building loyalty to the YMCA Movement is the focal point of our mission at the YMCA Retirement Fund.

The safety of our participants’ retirement savings is a key focus, and so we do not aim for the highest returns possible without constraints, because that could result in taking excessive risk. Protection on the downside is not free in the short run, but we are confident in our long-term investment strategies. With more than 110,000 people and over 800 YMCAs relying on us as their single-focus pension program, taking the long view is essential.

Diversified Portfolio

The Fund’s diversified portfolio is designed to provide a balance of growth and protection from risk over the long term. In order to structure a sound retirement plan, we hold many types of investment instruments to ensure a secure retirement now and in the future for all of our participants. 

Asset Diversification Pie

In recent years, we have been allocating increasing amounts to private investments, including private equity, real estate, natural resources and credit. The logical timetable for these to start bearing considerable fruit is three to five years from now.

Expected returns for these private assets exceed those available from public, liquid investments, at times by a significant amount. Yet, patience is required. We have been enduring relatively small near-term returns resulting from the higher up-front costs typical for these investments. However, we believe that this will best position the Fund to provide the sustained long-term returns we need.

The Hurdle Rate and the Funding Level

In order to support the Fund’s benefits (3% interest credits and 7% annuity conversion rate, as well as disability and death benefits) plus administrative expenses, a net investment return of roughly 6.5% per year is needed. We refer to this as our hurdle rate.

The funding level is the ratio of assets to liabilities and is an indicator of the general health of a plan. Many corporate defined benefit plans are operating with a funding level of around 80%. The Fund’s current funding level is 97%.

In any given year, in order to maintain the funding level when interest credits of 3% are granted, the Fund’s net investment returns must meet or exceed 6.5%. The chart below compares the net investment returns to the hurdle rate since FY 10 and the resulting funding level of each year. 

Hurdle Rate Chart

In years when net returns (the measurement of our asset growth) did not get over the 6.5% hurdle (fiscal years 2012, 2015 and 2016), the funding level decreased. When net returns exceeded 6.5% (fiscal years 2010, 2011, 2013, 2014 and 2017), the funding level improved. During FY 17 our net returns of 13% exceeded the hurdle rate, and our funding level grew from 91% to 97%.

Sometimes additional factors impact the funding level. In FY 14 we completed our recovery from the “Great Recession” (or the Financial Crisis of 2008-09) and achieved a funding level of 104%. In the following year we adopted a new mortality table, resulting in an increase in liabilities of $257 million. That increase, along with investment returns below the hurdle rate, reduced our funding level from 104% to 98%. The adoption of the new mortality table followed a study conducted by the Society of Actuaries and was required by the actuarial profession to better reflect the life spans of participants. Had this not come along when it did, we would likely be fully funded right now. 

Strong Operations

All of this is to say that my colleagues at the Fund strive on a daily basis, through investment management and benefits administration, to respond to the needs of our three customers:

Strong Operations

Not every pension fund handles both investment management and benefits administration, but the Fund has done this since its inception in 1922. As with our Investment Team, I’d put our Operations Team up against any other for its customer focus and skilled use of technology.

Benchmark Portal LogoWe do everything in-house, so when you call our specialists for help, you can be confident that you are speaking with people who are dedicated to serving only YMCAs, their staff and retirees. We know how hard it is to save for retirement, so we do everything we can to make the process easy, safe and secure. And we’re proud to have earned top honors two years in a row from Benchmark Portal, a global leader in customer service benchmarking.

1922 – 2017: 95 Years Strong

Since its start in 1922, your YMCA Retirement Fund has persevered in the face of economic turmoil several times throughout its 95-year history. It has always emerged stronger, having adapted every time, and FY 17 was one of these restorative years. Your Fund is 95 years strong, and we intend it to stay that way going forward.

Thank you for your continuing confidence in your YMCA Retirement Fund.

JMP Signature

John M. Preis, President and CEO