Thursday, January 26, 2012

CalPERS Earns 1.1% in Calendar 2011, a Bit Less Than the 7.75% They Need

I will make a guarantee. CalPERS WILL be going to the taxpayers to make up the shortfalls caused by their ridiculous assumptions. Maybe not this year, maybe not until 2022 when the largest cohort of the baby boom, the 1957 vintage, turns 65, but they will be assessing the taxpayers.
The numbers will be in the tens of billions of dollars.
From the Los Angeles Times:
It falls short of the 7.75% average that actuaries say CalPERS needs to meet obligations. Calendar-year results are just indicators — the public pension fund's fiscal year ends in June.
The nation's largest public pension fund, the California Public Employees' Retirement System, posted a 1.1% return on its investment portfolio in 2011, Chief Investment Officer Joseph Dear told his board.

The 2011 performance was well below the estimated average annual return of 7.75% that the fund's actuaries say is needed to meet current and future obligations to its members.

The $229.5-billion CalPERS provides retirement and other benefits for 1.6 million state and local government employees and their families.

CalPERS' annual investment results, whose volatility has echoed that of the overall markets, have become the focal point in an ongoing debate about looming pension fund liabilities and the ability of future generations of taxpayers to continue financing them. Gov. Jerry Brown has said he wants to overhaul state and local government pension programs, but whether he and the Legislature have the political wherewithal to do so in an election year remains unclear.

During the 2011 calendar year, CalPERS lost 7.95% on its public equity investments, lost 2.29% on its hedge fund investments, earned 12.38% on bonds and earned 9.92% on real estate.

In the first three quarters of the calendar year, it earned about 12.37% on its private equity investments. (The availability of these results lags a quarter.)

CalPERS' 2011 return was well off the 12.6% return for 2010 and 12.1% for 2009....MORE 

The problem appears to be that the politicians can't be honest with the taxpayers about the promises they made to the public employee unions, in return for union campaign cash, so the pols and CalPERS extend and pretend.

As the old joke goes:
People become actuaries if they don't have the charisma to be a CPA.