Employee Matters

This column is prepared by staff from the Office of Human Resources. E-mail questions to benefits@ohr.wisc.edu or call 262-5650. For more information, visit Payroll and Benefits Services.

State of Wisconsin Investment Board

What is the State of Wisconsin Investment Board?

The State of Wisconsin Investment Board (SWIB) is the state agency responsible for investing the assets of the Wisconsin Retirement System (WRS) and other state trust funds. The law requires SWIB to make investment decisions and conduct its operations in the best financial interest of the trust funds it manages. The WRS makes up 94 percent of the assets managed by SWIB. As of Dec. 31, total assets of the WRS were $83.2 billion.

How is the Investment Board managed?

Overall policy is set by a nine-person, independent board of trustees. They are responsible for establishing long-term investment policies, determining guidelines for investment portfolios and monitoring investment performance. The executive director, who oversees SWIB staff, is appointed by the trustees to develop and recommend policies and ensure adherence to state laws and guidelines.

SWIB is organized into three investment groups: public equities (stocks), public fixed income and private markets. Professional money managers on staff are responsible for daily investment decisions and are supported by a well-trained staff, with legal, accounting, technical and administrative skills. Investment decisions are made within the parameters of the board’s investment policies. External managers are hired to invest certain assets, also within those parameters.

How are my retirement funds managed?

SWIB shares WRS responsibilities with the Department of Employee Trust Funds (ETF), which manages individual retirement accounts and benefits. WRS is made up of the Core (formerly Fixed) Fund and the Variable Fund. The Core Fund is a broadly diversified fund with investments in stocks, bonds, business loans, real estate and private equity. Diversification helps stabilize the effects of market changes. The Variable Fund, a stock fund, is an optional choice for participants. Active participants can elect to have 50 percent of their retirement contributions in the Variable Fund.

Funding for the pension funds comes from contributions by participating employees, their employers and investment earnings. The retirement system is sound because of strong investment returns and the contributions. Accumulated funds are used to pay retirement, death and disability benefits. Participants received more than $3.2 billion in benefits in 2006 with more than 80 percent funded by investment earnings. In addition, once retired, participants may also benefit annually because of adjustments made to pension payments based on investment earnings.

How does SWIB’s work affect me?

ETF determines the effect of investment returns on individual accounts of active employees. The impact of the Core Fund returns is smoothed during five years to lessen the impact of market volatility. The Variable Fund exposes participants to a higher degree of risk, because of possible losses from unfavorable stock market performance, for the potential of higher returns in the long run. ETF computes those amounts based on the Dec. 31 rate of return for each of the two trust funds to determine the impact on participants.

For more information visit the State of Wisconsin Investment Board.