Posted on 08/15/2002 8:56:41 PM PDT by Vidalia
Hawaii's state pension fund, unable to escape the clutches of one of the worst bear stock markets in history, fell for the second year in a row as it ended its 2002 fiscal year with a $419 million investment loss.
Investments by the Employees' Retirement System fund lost 5.08 percent for its fiscal year ended June 30 and finished with a market value of just more than $8 billion, according to unaudited figures released yesterday.
The drop in the fund's market value from just under $9 billion at the end of fiscal year 2001 is attributable to benefit payouts of about $560 million and the investment losses of $419 million.
In addition, about $223 million in employee and employer contributions were roughly offset by fund expenses.
The 77-year-old Employees' Retirement System provides retirement, disability and survivor benefits for 96,000 city, county and state retirees and their beneficiaries.
Despite the fund's 2002 losses, ERS Chief Investment Officer Kimo Blaisdell said he was pleased the fund was able to outperform the 6.54 percent loss posted by its total fund benchmark, which is derived from the individual benchmarks for each of the fund's asset classes.
"On an absolute return, we'd rather see (the return) positive than negative," Blaisdell said. "But relative to what some of our peers have done, we've performed well."
For fiscal 2002, the fund outperformed 53 percent of public pension funds with more than $1 billion in assets. The diversified pension fund, which has its investments spread out domestically and internationally over stocks, fixed income, real estate, venture capital and timber, posted positive returns in 33 of 34 years until declining 6.68 percent in fiscal 2001.
It gained 7.46 percent in fiscal 2000 when the bull market was on its final legs.
In fiscal 2002, though, the fund stayed fully invested at its predetermined asset allocations even as many investors were switching to bonds or fleeing to cash.
"At the time when we made the (asset allocation) decision, it was based upon our capital market assumptions," Blaisdell said. "There are different risk tolerances that the fund has, much like individual investors. We have different time horizons.
"We do not change the asset allocation quickly. We're in it for the long term. We do not market time. If we see that bonds are going to outperform, we don't suddenly change the allocation. We're an $8 billion fund. It's not easy to suddenly up and change."
The fund, as of June 30, had its largest concentration of holdings in U.S. stocks at 41.44 percent, or $3.3 billion. That was broken down into 32.38 percent ($2.6 billion) in large-cap stocks and 9.05 percent ($724.7 million) in small- and mid-cap stocks.
Its next biggest stake was 23.07 percent ($1.8 billion) in U.S. fixed income investments, followed by 15.17 percent in international stocks ($1.2 billion), 8.68 percent ($694.6 million) in real estate, 8.67 percent ($693.7 million) in international fixed income and 2.98 percent ($238.5 million) in alternative investments such as venture capital and timber.
In the just-concluded quarter, the fund fell 4.08 percent, but still outperformed the total fund benchmark's return of a minus 4.72 percent.
"It's not a fair comparison to always look at what the S&P 500 is doing because it's just stocks," Blaisdell said. "Being a larger organization, we're more than just stocks. We have to be diversified for times like this."
For the fiscal year, the pension fund's U.S. stock holdings fell 14.57 percent as all, but one of its mutual fund holdings posted negative returns. Among the other investments, international fixed income advanced 16.84 percent, U.S. fixed income gained 8.82 percent and real estate rose 8.73 percent while international stocks fell 12.25 percent and alternative investments dropped 13.40 percent.
This for a state with a total population of less than 1.25 million population?
And this fund is only for the STATE EMPLOYEES?
That sucking sound is the unions of Hawaii taking all these funds and pocketing them for their own benefit.
Any questions as to why most lazy, ignorant, uneducated and illiterate are forced into the unions in this state?
The union hold on this state is killing it...
In addition, about $223 million in employee and employer contributions were roughly offset by fund expenses
which is very close to 3% of assets going to expenses each and every year, an incredibly high number compared to the about 1% of assets in the multi-trillion dollar mutual fund industry which also routinely cranks out monthly checks to many retired shareholders
even the morons at social security, who have no pesky investments to think about or administer, their only mission in life being the timely spitting out of reams of checks, manage to get it done for well under 1% of payout, which in this case would be about 5 million, or about 0.06% of their 8 billion in assets
wait until these clowns find their 8 billion reduced to 4 or less in a couple of years as this bear market grinds on, their costs will probably still be around 200+ million and thus closer to 5% of assets, and maybe, just maybe, someone will then finally question the truly obnoxious level of costs for cutting checks and losing bucket-fulls of money
nah, silly me, i forgot, this is hawaii, the land of milk and honey for corrupt union thugs and payroll-padders
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