Wednesday, December 17, 2008

Californicated: "Risky, Ill-Timed Land Deals Hit Calpers"

A few years from now this could cost California taxpayers huge money. I can't wait til the Journal follows up on CalPERS long-only commodity swaps investments. The story includes a nifty interactive that I'll try to lift.
From the Wall Street Journal:

At the height of the property bubble, California's giant pension fund, Calpers, made a fateful decision: It aggressively poured money into real estate. As a result, today it's one of the biggest owners of undeveloped residential land in America.

Bad Bets

See more details on some of Calpers's real-estate investments.

Partly because of these investments, California Public Employees' Retirement System is struggling to avoid one of its worst annual declines since its 1932 inception. Calpers has lost almost a quarter of its assets since July 1, the start of the current fiscal year.

The problems come at a time of uncertainty for the nation's largest public pension fund, which has been without its top two executives for nearly half a year. Calpers is poised to appoint a new chief executive as early as this week, people familiar with the matter said.

Calpers is now warning California's cities, towns and schools that they may have to cough up more money to cover the retirement and other benefits the fund provides for 1.6 million state workers. Some towns are already cutting municipal services, and at least one is partly blaming the Calpers fees....

...Calpers is creating a new computer database to more closely track "balance and diversification" in the real-estate portfolio. It also is proposing to reduce the maximum amount of borrowed money that can be used in housing deals, and cut back on loan guarantees....MORE

Horse gone, barn door closing.