In June 2024, the Retirement Systems engaged Agilis to perform an asset-liability stress test for each of the three retirement systems. Agilis has performed similar analyses for the Virginia Retirement System (VRS) and several other public pension plans. Agilis was tasked with (for each plan):
- Reviewing the current strategic asset allocation
- Examining expected future rates of return
- Examining outcomes in different market scenarios
- Examining outcomes on different measures, such as funding and contributions, in addition to asset-only returns.
They completed their work in late 2024 and presented the results to each system's Board of Trustees in January 2025.
Agilis simulated possible future investment returns, funded status, and County contributions under eight different market scenarios. The scenarios range from a most favorable Base Case (using current long-term economic assumptions) to a worst-case Japan scenario (based on Japan’s economic collapse in the 1980s). The chances that a Japan or worst-case scenario will occur, economists say, is low, as current financial regulations and economic structures are different. The Japan scenario is based on very pessimistic economic conditions, including that:
The economy collapses into an extended low-growth, deflationary equilibrium similar to Japan's experience beginning in the 1990's.
Risk assets such as public equity and real assets return near zero over the long term.
Short-term rates fall to near zero, with long-term US Treasury yields at 1.25%.
The full report from Agillis is available at this link.
