California public pension fund loses $29 billion

Sacramento CA

Description

The California Public Employees’ Retirement System (CalPERS) announced Wednesday a preliminary -6.1% net investment return for the 12-month period that ended June 30, representing its first loss in more than a decade. CalPERS’ private market investments did better than its public market investments over the last year. CalPERS announced Wednesday that its investments in public equity returned -13.1% and fixed income investments returned at -14.5%. Meanwhile, the system’s private equity investments returned at 21.3% and real assets returned at 24.1%. Investment returns play a large impact on pension system funding – meaning that a bad year of investment returns can have an impact on unfunded pension liabilities. CalPERS estimates that with a “discount rate of 6.8% and this year’s preliminary return of -6.1%, the estimated overall funding status stands at 72%.” When a plan is underfunded, pension systems only have a few options to address it. They can either hope to earn more in the stock market or raise contribution rates for employees and employers, which means taxpayers in the case of public pension plans. Calpers is currently one-third underfunded, about $1 trillion and yet continues to do business not by investing in performance stock, but by political stock! Time to start dealing with reality and not feeling with the public's money?