He said the fund’s “serendipitous” liquidity planning and preparation for this part of the cycle has allowed it to navigate the crisis so far. CalPERS simply should not be interested in such metrics and should not be pursuing deals which perform this way. Asset Allocation Quarterly Update: View CalPERS Trust Level Quarterly Update – Performance & Risk (PDF). > if the portfolio were more heavily weighted at the end of the year, As William Gibson remarked somewhere, “If that were going to happen, it would already have happened.”. If it’s so, then there’s a reason, and it’s likely not a reason conductive to the financial health of the beneficiaries. The board approved the health plan premiums for 2021, at an overall average increase of 4.32%. (again)”. Current asset allocations are 50 percent stocks, 28 percent bonds, 15 percent factor-weighted stocks (aka index funds), 13 ... For the first nine months of the current fiscal year (July 2019 through March 2020) the CalPERS rate of return was a negative 4 percent (-4%). We would present our spreadsheet, but they don’t display well on WordPress. The CalPERS press release stated that the return benchmark for the fund overall was 4.33%. You’d aim to meet your cashflows, not some “investment performance benchmark”. That means 4.18% or lower would mean no performance bonuses. March 31, 2020: https://www.calpers.ca.gov/docs/board-agendas/202006/invest/item06c-01_a.pdf Investment management makes sense in defined contributions pensions, not defined benefits (which is majority of CP pensions I believe). Thanks for your continued reporting on CalPERS, PE, and pensions. The Monthly Update provides estimated asset allocation market values for the Public Employees’ Retirement Fund. Dealing with the Second Wave: Subsidies, Instead of Ordering Closures, Home Health Aide Services for the Elderly as a Lemon Market, Bloomberg Warns: A Covid Vaccine Could Help the Virus Spread. With daily rebalancing this will cause the final return to be 1.25% which is clearly higher than the 0% average. “We have a plan,” he concluded. You can compute 6/30/2020 asset allocations from https://www.calpers.ca.gov/docs/perf-monthly-update.pdf 1 After we ran the numbers, we asked two other people to make independent computations, down to pulling figures from the original records so as to prevent the possibility of replicating data entry errors. Fourth, as to timing, I didn’t explain in the post, but CalPERS (and the entire public pension fund industry) reports PE and RE private fund results one quarter lagged as in March 31 results are reported along with June 30. They are on board. Unfortunately this is not one of these cases where you can reliably figure out what the number should be from the data provided. Now imagine that you were significantly more heavily weighted in that class early in the year. Richard Ennis, a former editor of the Financial Analysts Journal who has spent over 30 years advising pension fund trustees and recently published a major study documenting the poor performance of public pension funds’ investments in “alternative investments” in the authoritative Journal of Portfolio Management, confirmed our concerns: Based on publicly available information, Naked Capitalism estimates the fiscal year 2020 investment return for CalPERS at 4.12%, which is 58 bps less than the preliminary figure of 4.7% recently released by CalPERS. So the point is not that “Calpers is lying! Portfolio Managers would object to the valuations used and would (prior to outsourcing the back office) have the valuations changed so that they would get a larger bonus (I wouldn’t change it so they would brow-beat others to get that changed). Effective June 17, 2020 and until further notice, the program will not be accepting new applications for coverage. Use our online form for Questions, Comments, & Complaints about CalPERS programs and services. © 2020 Conexus Financial. Although technology companies are driving the recovery in public markets they noted “laggards in the index too,” and flagged that the real impact of Covid-19 is still “evolving.”. Needless to say, having the board abdicate what already had been limited, and arguably perfunctory oversight of the critically important investment operations, creates baseline concerns about caliber of governance at CalPERS. The most important figures CalPERS publishes all year are its preliminary returns, which it releases shortly after its June 30 fiscal year end, and its Comprehensive Annual Financial Report, which comes out in November. As is the case with July Investment Committee meetings, the board had numerous educational sessions on various investment topics. Doesn’t mean there isn’t a need for transparency in all this, esp if bonuses are on the line. October 27, 2020 - 9:00 pm October 27, 2020 - 9:00 pm To understand why progressives are so incensed about the U.S. Supreme Court, look no further than a … Market Had a Sad” investments laundered through their cronies in Real Estate and Private Equity. That is a long-winded say of saying that while the “Trust Level” assets could conceivably fill the gap, they would have had to have returned on the order of 70% to do so. CalPERS changed its bonus policy under departed Chief Investment Officer Ben Meng so that the performance bonus for the investment staff now depends on CalPERS overall results. Investment strategies for the world's largest institutional investors. and the approximate impact on the total return. All investments have risks. It is subject to disclosure requirements far in excess of private sector companies and investors, although CalPERS has been doing its best to ignore and evade those obligations. Since this report is critically important to CalPERS, one would think it would be easy for them to describe the missing factor or factors that would explain the 58 basis point anomaly. 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CalPERS Names Anne Simpson (@AnneSimpsonUSA) Managing Investment Director of Board Governance and Sustainability: http://ow.ly/FAGa30rjLEr, We serve those who serve California.© Copyright 2020 California Public Employees' Retirement System (CalPERS) | State of California, As Veterans Day approaches, we are saluting our me, This week we held virtual celebrations of the Fest, Today we hosted an internal Cybersecurity Month Fi, This year’s Great California ShakeOut may have l, CalPERS Announces Health Plan Premiums for 2021, CalPERS Reports Preliminary 4.7% Investment Return for Fiscal Year 2019-20, How We Use Risk Management to Protect Your Benefits, 12 Ways Retirees Can Earn Extra Income From Home. On top of that, our result, if confirmed, would have significant implications for CalPERS investment office employees. Find information related to CalPERS investments, including asset classes, business opportunities, governance, and targeted investment programs. In other words, were the explanation for the discrepancy as simple as you suggest, CalPERS would already have provided it. So it is not going to show anything other than very short term shifts in asset class weighting. Another rhetorical question: isn’t making bonuses contingent on total investment returns sort of like paying CEOs in stock options? CalPERS might be concerned that it would make that bad situation look worse by showing that the other investments they eliminated also outperformed everything else they did, and by a large margin, even if that was due to very lucky timing of the exit. As for corporate restructuring, Wuijster noted “companies in the middle” that will need to rethink strategy and emphasise sustainability. Perversely, CalPERS could see this result as creating a big optics headache. Are they remaining quiet so as not to interfere with their bonus? Too many people collecting over $100,000/yr. Is it just a board of bystanders? Access to the top GPs is critical, yet CalPERS mustn’t increase private equity by compromising the underwriting standards or liquidity provision of fund, said Meng, explaining that a key question is assessing how much the pension fund can “give to top managers.” In its new approach to private equity investment, CalPERS is “ramping up” its ability to co-invest and invest in separately managed accounts, as well as talking with potential captive GPs, willing to work with one Limited Partner. This slide summarizes key tasks: A careful reader will note that BDO merely confirms investment “holdings” with custodians and investment managers, and not their valuation methodologies. Apparently not the incompetents. (rhetorical question). Although CalPERS scale and brand will help access top GPs the fund is also limited by its size and the fact GPs only raise money “every three years or so. Medicare HMO and PPO plans will see premiums decrease by 4.46% and 0.65%, respectively. But it is important to understand that the lack of transparency is not merely in service of executive bonuses. I do have one question that is related – where exactly does the CalPERS Performance Team report into? First, in case it wasn’t clear, I agree 100% that CalPERs should provide audited returns and blasting them for not doing so is totally legit. The board heard the preliminary investment returns for Fiscal Year 2019-20 to kick off the meeting: A 4.7% net return on investments for the 12-month period that ended June 30, 2020 and CalPERS assets at the end of the fiscal year stood at more than $389 billion. In recent years, the preliminary returns have been identical to the final result, so this figure, unlike, say, the preliminary GDP estimate, is not typically revised down the road. And of those there are, not all of them can hit their return targets anyway.