Friday, January 30, 2009

CalPERS Portfolio Down 31.8% From Peak

CalPERS portfolio has lost $81 billion, or 31.8%, since its peak in November 2007 of $255 billion. According to a press release from July 2007:

For the fourth straight year, annual returns were in the double-digits to raise the 10-year average to 9.1 percent. Total assets increased by $128 billion over the past 10 years.
In July 2007, the CalPERS portfolio size was $245 billion, which means it was $117 billion in July 1997. It stands at $174 billion today. That puts their growth rate for the last 11.5 years at 3.72%. They would have done better in t-bills. Keep in mind this calculation is simplistic, and doesn't account for member contributions or outlays.


Anonymous said...

"In July 2007, the CalPERS portfolio size was $245 billion, which means it was $117 billion in July 1997. It stands at $174 billion today. That puts their growth rate for the last 11.5 years at 3.72%. They would have done better in t-bills. Keep in mind this calculation is simplistic, and doesn't account for member contributions or outlays."

Remember your "Age Distribution" chart of state workers. Most have been in their highest contribution ages in the last 10 years. I bet an in depth look at the numbers (which we can't get) shows a negitive return for the portfolio over the last 10 years.

Max said...

No doubt. The July 2007 pr said they were 97% funded, which in PERS-speak means that 97% of their pension and healthcare expenses were paid for by returns. I'm sure there's a growth factor premium as well that they charge members to keep the portfolio growing.

It's telling that even in their peak earnings year (19%+), they still weren't completely self sustaining. With 10+ years of investment gains erased, these guys look more like a hedge fund than a pension.

But don't worry. The California taxpayers will cover the losses, right?

Anonymous said...

Per the Calpers website frequently asked questions:

"What if the pension plan fails, will my funds still be there?"

Answer: Yes, your funds are guaranteed by LAW.

So, I called Calpers because this intrigued me, and spoke to their financial department. I asked them which law guaranteed the fund, and they stated it was Government Code: 12%$@#%% (not going to repeat). This fund is not tied to the state of California budget crisis, but should it fail to meet its obligations of paying out its recipients, it was told to me that the fund was guaranteed by the Federal Government.

So, if the fund fails on the backend, guess who picks up the tab. The taxpayer.

But what will the fund do about the front end - and correcting it before the fund drops further? Well, they will simply require a greater contribution from the employer's side. Whom is the employer - you ask?

The employer is the State, the Counties, The Cities, and any municipality vested in the fund. So how does the public employer raise its contribution - you ask? Why, they just raise the taxes they charge the citizens, that's all. Or they cut services to make up for it.

Basically, the public sector employee has got the private sector employee by the balls in this scenario - and I am not sure how to untangle it. I always grift this pervasive sense of entitlement from any government worker I talk to - and there is this unbelievable disconect that they have from the rest of us in the private sector that pay their retirement plans!

Just spoke with a retired couple yesterday whom were both CYA employees (wife was guard retired at 50 @3% / husband was plumber at the facility and retired @3% at 55). Double pensions, both had 25+ years in.

I commented to them that the Calpers fund was created at a time when the actuarials were severely shorter than they are now (I don't have the raw data - but I am assuming that the average life expectancy has risen by 6 to 8 years since the early 60s?).

They replied by stating that Calpers gives all of its emergency services personel a pamphlet with the actuarials that Calpers derives from its members based on each job category. He said Calpers told him his wifes life expectancy beyond retirement was only 3 years, and his was only 5 years?

How is CYA more stressful than serving in Iraq? And those guys only get 2.5% a year? How stressfull is being a plumber anyway?

Bottom line - The government workers unions are in so deep, at an institutional / systemic level in this system - that things are only going to get worse. They will ride the back of the taxpayer until there is nothing left, and still be indignant as hell about it.

I say go to Nevada 1st - (0% personal income tax), as are all the smart ones. Then focus on getting out of the U.S. This situation is not going to correct itself.

Anonymous said...

For the last 10 or so years, the UC pension plan has required no employee contribution. Obviously, that's changing. To ensure that it's well funded, employee contributions will be required again.

Currently, employees also have a 'defined contribution' which is a certain percentage taking out of the paycheck, but is controlled by the employee. It's their retirement money, but they're forced to contribute it.

So the first plan is to redirect that required contribution from the personal account to the pension fund. You'd think people would want the pension to be well funded, so they can actualy draw from it. But the Unions are fighting that. They seem to think they should get a pension without having to put anything in.

Anonymous said...

it amazes me when someone does not have to contribute anything to get a $80,000/year pension.

What would the value of this annuity be in todays market? What is the safe rate of return right now. Judging from the T-Bills its 0%. But lets say in a fair economy it was 4%. That is the equivalent of a $2,000,000 annuity. Unbelievable!

I find it funny that not more government workers look at this funny mathematics and beging to speculate how long it will last. Hmmmmm, lets see - i put nothing in, and i get a $2,000,000 annuity at age 55, and draw on it for 30 years. Sounds logical to me. Yup.
Hey, did you hear about the octuplets, isn't that great? DOes anyone feel like taking the day off to march on the capitol agains the forebearance? I don't have much else to do. Doop-dee-doop.

Hate these people. They are F-ing me and they know it, and will refuse to say it to my face. THis is the problem with bigger government. It gets people addicted to the handouts, and they become lobbyists for it. ARGHGHGHGHGHGH!!!!!!!!!!!

ohwell - we'll make great pets for China!