Money & Company
Tracking the market and economic trends that shape your finances.
August 17, 2011 | 3:58 pm

This month’s plunging stock prices cost the state’s biggest public pension fund $9 billion, but the fallout from the “market riot” could have been much worse, said Joseph Dear, chief investment officer of the California Public Employees’ Retirement System.

Although the $228-billion portfolio lost only 1.7% of its value in the week-long period between Friday, Aug. 5 and Friday, Aug. 12, “it was a wild ride with eerie echoes of 2008,” the roughest stretch of the recent recession, Dear reported to the CalPERS board Wednesday.

CalPERS posted a 20.7% return in the fiscal year that ended June 30, the best result in 14 years.

Dear credited an earlier CalPERS decision to keep 4% of its assets in cash for helping the pension fund have the flexibility it needed to react to extreme market volatility.

“The wild ride tested the robustness of our risk mangement in a dificult environment,” Dear said. “We did OK.”

Though the last two weeks turned out not to be 2008 all over again, they underscored that many of the factors contributing to the recession — such as excessive private-sector debt, insufficient regulation of financial institutions and compensation policies that emphasize short-term profits — have not been addressed, Dear said.

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