The county Employees Retirement System is outperforming much larger retirement funds throughout the state.

County Controller Ben Holland said the county retirement board looked at the past 10 years of retirement fund earnings and came up with the average increase over the past one, three, five and 10 years.

Over the past 10 years the county fund has increased by 6 percent, Holland said.

The cities of Pittsburgh and Philadelphia in that time increased their retirement accounts by 4.8 and 4.4 percent, respectively.

The state Public School Employees' Retirement System increased its fund by just 4.3 percent in 10 years, as did the retirement fund for state employees, Holland said.

The percentages represent the amount of money the retirement funds have earned after paying investment managers, and that's why the county has scored so high, Holland said.

While many entities hire “active” investment managers to choose stocks they think will be top performers and earn big returns, the county uses the “passive” method of investing for 85 percent of the funds in its investment account.

Holland explained that the county invests in all the stocks in an index, like Standard and Poor's, instead of hiring an expensive active investment manager to select the stocks they think will outperform the general stock market.

“I don't believe you can outperform the market consistently for long periods of time,” Holland said.

Those who hire active managers also must pay six-digit salaries to their managers, whether their predictions earn an increase or not.

Holland said the retirement board, which consists of county commissioners, Holland and the county treasurer, invests through PNC and avoids those high fees.

“We've got five people outperforming the best and the brightest,” Holland said. “The county is saving millions of dollars.”

He said the county spends about $12 in fees per each $10,000 in its $200 million pension fund, while those who use active investment managers pay about $50 per $10,000 in their fund.

“If we're saving close to $1 million per year, that's $1 million reinvested (in the county),” Holland said.

He said it would be easy for the county commissioners to take a risk and hire an active investment manager to try and make a quick buck for the retirement fund.

“I give the commissioners credit,” Holland said. “I think they see the merit in passive investing.”

Commissioners Chairman Leslie Osche said the county began its passive investing model several years ago upon the recommendation of former county controller Jack McMillin.

She praised the retirement boards of years past for instituting a program that has proved beneficial for the county.

“The retirement board has been stellar in making those decisions over the years and currently we will continue to do the same things,” she said.

The success of the retirement fund is beneficial for taxpayers, Osche said, because retirees are guaranteed a pension. If not for the increases in the pension fund, the commissioners would have to use taxpayer dollars year after year to shore up the pension fund.

“So it's keeping the annual contribution to that fund at a rate that we can manage,” Osche said.

Holland said the county has 600 retirees and 600 active employees who don't have to spend time worrying about their pensions.