Recent stock crash has cost CalPERS $9 billion
By Dale Kasler
The Sacramento Bee
Published: Thursday, Aug. 18, 2011 - 12:00 am | Page 6B
© Copyright The Sacramento Bee. All rights reserved.
The recent wreck on Wall Street cost CalPERS billions of dollars, and the pension fund believes there's more instability coming.
"We should expect more market riots," chief investment officer Joseph Dear told CalPERS' governing board on Wednesday.
The California Public Employees' Retirement System had barely put the wraps on one of its best investment years ever – gaining $37 billion, or nearly 21 percent – when the markets started tumbling.
Since the new fiscal year began July 1, the fund's portfolio has lost $9 billion. That has erased about one-fourth of the previous year's profits.
There's no immediate turnaround in sight. With about half of CalPERS' portfolio tied up in stocks, continued turbulence in the equity markets will likely depress the portfolio.
"It's hard to see a double-digit (percentage) return this year, but it's still early," Dear said.
CalPERS' investment performance is critical. The less money it earns, the more it needs from taxpayers to keep the pension system going.
The heavy investment losses CalPERS took in the 2008 crash, coupled with chronic state budget deficits, have sparked calls from many Republican lawmakers and others to overhaul the pension system.
In his regular monthly report to the Cal-PERS board, Dear said the latest market jitters don't mean a repeat of 2008. But he said the U.S. economy is in a "slow, grinding recovery," and the prospects for growth have worsened lately.
He added that CalPERS is in a better position to handle big swings in the market than it was in 2008.
During the crash, the pension fund ran into a temporary cash shortage. As a result, it had to sell high-quality assets that it would have preferred to keep, Dear said.
Now, CalPERS keeps a higher percentage of its assets in cash, which creates a buffer against instability, he said.
The California Public Employees' Retirement System had barely put the wraps on one of its best investment years ever – gaining $37 billion, or nearly 21 percent – when the markets started tumbling.
Since the new fiscal year began July 1, the fund's portfolio has lost $9 billion. That has erased about one-fourth of the previous year's profits.
There's no immediate turnaround in sight. With about half of CalPERS' portfolio tied up in stocks, continued turbulence in the equity markets will likely depress the portfolio.
"It's hard to see a double-digit (percentage) return this year, but it's still early," Dear said.
CalPERS' investment performance is critical. The less money it earns, the more it needs from taxpayers to keep the pension system going.
The heavy investment losses CalPERS took in the 2008 crash, coupled with chronic state budget deficits, have sparked calls from many Republican lawmakers and others to overhaul the pension system.
In his regular monthly report to the Cal-PERS board, Dear said the latest market jitters don't mean a repeat of 2008. But he said the U.S. economy is in a "slow, grinding recovery," and the prospects for growth have worsened lately.
He added that CalPERS is in a better position to handle big swings in the market than it was in 2008.
During the crash, the pension fund ran into a temporary cash shortage. As a result, it had to sell high-quality assets that it would have preferred to keep, Dear said.
Now, CalPERS keeps a higher percentage of its assets in cash, which creates a buffer against instability, he said.
No comments:
Post a Comment