Posted on 07/18/2016 8:56:52 PM PDT by bkopto
California’s largest public pension fund made a return of less than 1% in its most recent fiscal year, the fund’s worst performance since 2009.
The California Public Employees’ Retirement System said Monday that its rate of return for the year ended June 30 was just 0.61%. What’s more, Ted Eliopoulos, the pension fund’s chief investment officer, said the poor year has pushed CalPERS’ long-term returns below expected levels.
“We have some challenges to confront,” Eliopoulos said during a conference call. “We’re moving into a much more challenging, low-return environment.”
CalPERS assumes that, in the long-term, it will earn investment returns averaging 7.5% a year. If the fund fails to meet that goal, the state’s taxpayers could be forced to make up any shortfall in pension funding.
(Excerpt) Read more at latimes.com ...
They divested from Israel and gun companies didn’t they?
I guess the windmill factories aren’t paying too well these days.
Don’t worry - taxpayers will make up any shortfalls of the insane public union pensions...
CalPERS assumes that, in the long-term, it will earn investment returns averaging 7.5% a year.
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Way too high for this Obama economy.
If I understand correctly, much of the CalPERs board is made up of union creeps; and if so, might a full, complete, and public audit of their investment choices and rationale be in order?
How Democrats operate: private profits, public losses, minus a hefty transaction fee in all cases. Heads they win, tails you lose.
They should just do indexing and fire the crony advisors making hundreds of millions or more per year.
This is what happens when the Federal government wants to keep interest rates so low so that they can keep borrowing more money. It also what happens when bankers want to use other peoples money to get rich without paying anything for the privilege.
If The Fed says 0% interest - zero it is. Deal with it.
This is the exact issue of why institutional investors in 2007-2008 bought risky investments like subprime mortgages, packaged up into bonds that were declared to be AAA, even though everyone knew they were tremendous risks. Interest rates had been falling since 1981, and they had to keep chasing higher returns. This meant adding risk.
CALPERS is waiting to go all in on the High Speed train to nowhere. Those returns should take it right over the top,
I’ll be right there when the state has to start selling things like art, parks, state senate office furniture...
Probably trying to hook themselves onto the US taxpayer for a bailout when it all goes bust.
“The Federal Reserve is the culprit here. Pension funds invest in a lot of fixed income securities. In fact they are often limited in what they can invest in. “
You should look up the CalPers asset allocation and then revise your post ...
“This is the exact issue of why institutional investors in 2007-2008 bought risky investments like subprime mortgages, packaged up into bonds that were declared to be AAA, “
Those with subprime mortgages were given BBB ...
Way too high for almost any economy. 30-year treasuries have not yielded 7% in over 20 years. Big funds like these also face 2 reasonable restrictions: They have to remain diversified, and they have to limit risk. That means they will face diminishing returns the larger they get, and could not truly outperform over time. They would need to either lock in high returns by buying T-Bills when they are above 7.5%, or the economy would have to be growing at a similar clip including of course stocks. But its not a reasonable expectation to plan on 7.5% “average” over long periods of time because we have a Federal Reserve that seeks as part of its primary mission to keep inflation in check by manipulating interest rates. If rates are above 7.5% that means the economy is really humming along at an inflation rate over 5%, but jacking rates itself is a measure taken to slow the economy, to slow inflation. So Calpers expectations essentially runs counter to monetary policy.
CALPERS is waiting to go all in on the High Speed train to nowhere. Those returns should take it right over the top,
They need to get on the Trump bandwagon quick.
The shortfall of 7% will compound every year unless the fund makes over a 7.5% return next year.
This is what the “financial advisors” aka scam artists never tell you when you have a bad year.
The shortfall should be collected from California taxpayers now—but don’t sit and wait for that to happen.
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