PIERRE, S.D. (KELO) — Investments for the South Dakota Retirement System returned 22% for the year ending June 30, 2021, its trustees heard Thursday.

The worth rose to $14.6 billion, up from the 2020 finish of nearly $12.3 billion.

The large gain was much more than the 6.5% return necessary to keep the system in financial balance.

“A very, very good year,” assistant investment officer Tammy Otten said. It was the fifth-largest annual gain in the five decades the system has existed. She drew laughs with the closing comment of her presentation. “What are things going to look like a year from now? We’ll see.”

There was a gray lining in the silver cloud. The capital-market benchmark was up 28%.

Otten said the under-performance resulted from a decision by the state Investment Council to reduce risk because many stocks seemed over-valued.

The council went as high as 73% investments in stocks but then pulled back, finishing at 52.9% in stocks and 33% in cash.

That reflected the long-term contrarian investing approach of state investment officer Matt Clark. “I would do it the same way all over again,” he said.

In normal times, the 22% gain would have been thrilling, according to Clark. “We don’t have any confidence we can predict the short-term market behavior.” SDRS investments gained 1.59% in 2020.

The long-term fair value of a stock cuts through the market’s up and downs., Clark said. Patience is key: “You might have to wait five years and sometimes ten.”

State government and public universities participate in the system, as can county and municipal governments, public schools and other public entities.

The system’s 2020 annual report showed total membership of 92,325. There were 30,342 benefit recipients and 41,327 active contributing members and 20,656 inactive non-contributing members. The system received $263.2 million in employer and employee contributions and paid $625.8 million in benefits and refunds.

The 2022 cost of living adjustment to benefit recipients likely will be 3.5%, the largest in SDRS history, retirement system officials told the Legislature’s Executive Board on Tuesday. The adjustment is tied to the federal CPI-W measure of inflation.

The system now is funded at 105 to 106% of its long-term liabilities, senior actuary Doug Fiddler told trustees Thursday.

When stocks drop 10 to 20 percent of their estimated long-term value, the investment council looks to buy. The reverse was true in the past year as Congress distributed COVID-19 stimulus to boost the economy, Clark said.

He’s trying to spread the contrarian long-view philosophy throughout South Dakota. “I want it to last longer than my run.”