With three California metropolitan areas electing to seek bankruptcy relief in the past month, in large part credited to underfunded pension obligations, the last thing California needs right now is more bad pension news. CalPERS’ 1 percent return is well below the fund’s discount rate of 7.5%, a long-term focus on that CalPERS reduced recently as it re-evaluated its economic assumptions in the current trading environment.
= $ =pOther pension programs have made recently. The speed is significant for the reason that it determines the money such funds need to invest now in order to meet future pension obligation needs. Now, to be sure, recent marketplaces have been irritating. Bond yields are in multi-generational lows. Stock market results have been generally positive, but most active managers have underperformed the S&P 500 as increases have been generally limited to only a few industries.
I have written several posts over the past few months about decisions created by public pension plans that even at that time time appeared very short-sighted. The California Public Employees Retirement System is really as concerned as any investor about the uncertainty in the U.S. That is why Calpers, as it is known, is a “longterm trader” that is playing down equities, Chief Investment Officer Joe Dear told CNBC Wednesday. He indicated the Calpers portfolio is “underweight” equities by about 4 percent from its typical allocation. CIO of the finance covering 1.6 million open public employees.
With uncertainty and a slice in its stock collection, the fund …