calpers

By Teri Sforza / Staff Writer
July 12, 2016 – Updated 7:37 a.m.

Public workers are pumping more money into retirement funds. Public agencies are pumping more money into retirement funds.

Yet the market seems distinctly unimpressed.

The California Public Employees Retirement System – the nation’s largest – lost about 2 percent of its market value in the fiscal year that just ended, according to unofficial numbers published last week on the CalPERS website. This came despite doubled-down efforts to beef up its bottom line.

The value of CalPERS investments was $293.7 billion on June 30, down from $301.9 billion one year earlier, according to CalPERS’ daily valuation report. That number accounts for daily movement of some assets but not others, which are updated quarterly.

Challenges are expected to continue for years, even as the wave of graying baby boomers heads into retirement.

CalPERS is slated to release its official 2015-16 numbers next week, and declined to discuss details with the Register beforehand (though officials noted that the fund’s July 7 value was nearly $295.7 billion.) But last month, Ted Eliopoulos, CalPERS’ chief investment officer, tried to prepare officials for a bumpy ride going forward.

“Last fiscal year, our return was 2.4 percent,” Eliopoulos said during a committee meeting. “And this fiscal year, as we head into July, we’re likely to be flat, which is a nice way of saying zero.”

The next three to five years are shaping up to be “a challenging market environment, not just for CalPERS, but for all investors,” Eliopoulos added. “It’s going to test us.”

Projections from independent third parties are “materially lower” than what CalPERS forecast just two years ago, he said. With its current mix of investments, CalPERS can expect a total return of just 6.4 percent over the next decade.

It has assumed a return of 7.5 percent.

That difference is of great import, because investment income is the bulk of public pension payments. And since pension payments are guaranteed, any shortfall would have to be made up by taxpayers.

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