Friday, November 25, 2011

Report from the PERS October Investment Committee meeting

Here are the video and reports from the October meeting of the PERS Investment Comittee.* The committee meets bi-monthly and is where the real nuts and bolts of PERS are. I haven't had time to review the reports but here is a nice little document downpour for you guys that are interested in reading them. I apologize for the poor quality of the video and audio. PERS implemented a policy requiring me to place camera at the back of the room, regardless of how many people are in the audience. That's right. Even if no one but me is in the audience, I still have to sit at the back. So much for sunshine.

Notes from the market update posted below:
1. 2nd quarter GDP was 1.3%, 3rd quarter estimate is 2.5%.
2. Headline & core inflation increased 3.9% & 2.0% in last twelve months.
3. Markets as of October 21, 2011: S&P YTD: Up 1.0, Russell 2000: Down 8.2%, MSCI EAFE Index is down 9%, MSCI EM Index is down 18.3%, BCAG is up 6.1%, TIPS is up 11%.
4. S&P 500 was down 13.9% for the third quarter.















Now for the reports.




















*Before we get started on what took place at the hearing, here are the basic facts about PERS according to its most recent audited financial statements and Executive Director Pat Robertson's comments at a May luncheon videotaped by this website. All figures are based on the financial statements for the year ending June 30, 2010. READ THIS BEFORE YOU READ ANYTHING ELSE.

Employees: 165,644
Average years of service is 31
Average age is 59.

Asset allocations:
47.8% in US equities
25.4% in debt securities
4.6% in real estate
19.5% in non-US equities

Total assets: $21.2 billion on May 1,2011, $17.1 billion in 2010 ($15.5 billion in 2009, $19.7 billion in 2008).

Investment rate of return: 14.1% for 2010.
3-year rolling average: (5.5%)
5-year rolling average: 2.1%
10-year rolling average: 2.3%
20-year rolling average: 7.4%
30-year rolling average: 8.7%

Investment performance since 2000:
2000: 8.4%
2001: -7.1%
2002: -6.6%
2003: 3.5%
2004: 14.6%
2005: 9.8%
2006: 10.7%
2007: 18.9%
2008: -8.2%
2009: -19.4%
2010: 14.1%

Current funding level of actuarial accrued liability: 64.2%. Ms. Robertson said 80% is considered to be the "benchmark of a well-funded plan." Ms. Robertson stated at the May 3 luncheon PERS' accrued liabilities have doubled since 1998 (thanks to the legislature's increase in benefits in 1999 with no additional improvement in "funding mechanisms"). 2010 audited financial statements

Page 8 of the 2010 audit states PERS spent $409 million more in benefits payments than it received in contributions although that does exclude the $2.1 million income from investments. PERS lost $3.7 million in investment income in 2009.

Earlier PERS posts:
PERS charts
PERS budget hearing
PERS Commission hearing
August PERS Investment Committee video and reports
Resolution to study PERS passes
SLRP fund has over $11 million
What is SLRP?

14 comments:

KaptKangaroo said...

Cursory glance indicates a lot of pretty circles that really make no sense. Funny to watch statistics in action.

Did they actually recommend Small Cap International? I would agree if their objective is to re-capture losses that continue to plague PERS. However, the risk factor, or standard deviation (as the presentation laid out), is as risky to the downside. Typically small caps are 20-30% risk; add international to it (historically) you are looking at 40-50%. Unless the fundamentals in investing have changed (i.e. international is now less risky) this does not appear to be very sound investment advice.

It looks like they are taking funds to expand their international presence at the expense of the principle that is available in PERS.

I'm kinda' surprised what is being presented in the face of the continued deficit vs. years ago.

Then again, I could be completely incorrect. Maybe they are trying to aggressively recapture the losses of previous years.

Anonymous said...

You've got 2 pieces to the 3 piece puzzle.

this does not appear to be very sound investment advice.

It isn't.

Maybe they are trying to aggressively recapture the losses of previous years.

The client IS desperate and being so is prepared to make any stupid decision because they are caught between a rock and a hard place. We already know which is the rock and where is the hard place.

The third piece? The BIG, BIG, HUGE, PAID-UP-FUCKING-FRONT money is in the TRANSACTIONS.

You ain't seen nothing yet about the heap of trouble PERS is in.

Anonymous said...

9:42,

If you are correct, there should be a big stink made about why they aren't buying institutional shares or shares traded at NAV. And then there should be some lawsuits filed on behalf of the taxpayers.

Anonymous said...

These numbers say it all:

3-year rolling average: (5.5%)
5-year rolling average: 2.1%
10-year rolling average: 2.3%
20-year rolling average: 7.4%
30-year rolling average: 8.7%

If you can't see a trend there then vote for Obama.

Anonymous said...

KF and others, Ms Robertson has more than enough time in to retire if she gets tired of the aggravation.
She has more than a little self-interest involved in PERS doing well as it's her retirement money at stake as well.
Y'all might want to look at who'd be replacing her if y'all suceed in running her off.

Kingfish said...

Who said I want to run her off?

Anonymous said...

Well...hmmm...since the PERS buck stops on her desk and she's the visible scapegoat opportunity, doesn't the constant criticism have that potential result? Aren't you painting a political target on her back?If a head rolls, it'd be hers and not the idiots she has to try to educate and persuade. The " take" by those hoping to avoid responsibility will be she isn't a good " cat herder".
I've missed any praise of her as the competent person in the room who is trying to do a good job. And, who has made PERS better than it was when she took over.
What IS your aim here?

Kingfish said...

People like you are part of the problem. All I've done is post the investment committee reports and video of the meetings. No editorial comment was made and all original documents were posted for everyone to study.

However, the mere existence of any information on PERS unhinges you and you immediately squeal I'm after the director, which is not the case. I have said more than once that too many people on both sides of the debate are uninformed about PERS and have no clue about what it does, how it manages funds, and what the true picture is.

You choose not to read or study anything, discuss anything posted but instead, shoot the messenger instead of even debating a point. You're nothing but a tool and a hack.

KaptKangaroo said...

It truly appears as if someone has a guilty conscious. I don't even know who this person is. I've only commented on the numbers up to this point.

Hmmmm. The earlier points make one ponder why suddenly these comments show up.

Anonymous said...

I've missed any praise of her as the competent person in the room who is trying to do a good job.

Sorry. I've missed the quantifiable data testifying to the competence.

Anonymous said...

uh huh, I see. Thanks 11:45am for proving my point.

I actually think you SHOULD editorialize or at least compare to other States during the same time period, KF.

I think you should report on how the PERS system is structured as well.

KK could then tell us what he'd have done differently and how he'd change the current structure to ensure the future is better managed.

KaptKangaroo said...

I wouldn't invest in a "Hell Mary" pass called International Small Cap to the degree they are saying!

Large Cap equities with global exposure and a hefty dividend would be a nice start.

Anonymous said...

That's "Hail Mary", you know. "Hell Mary" is focused on some peacocks at the moment.

KaptKangaroo said...

Ta da dum! Nice.


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