Yesterday CalPERS released a press report yesterday titled, CalPERS Reports Preliminary 2011-12 Fiscal Year Performance of 1 Percent. Since I recently read their financial documents and made a comment about them, I was surprised that they compared the investment return to their 20-year investment return rather than their five or ten year investment return. When you compare the latest investment return to a ten year return of 5.7% there is a greater call for action by the board. Since they are spending the equivalent of 6.4% of their fund on pension benefits each year($15 billion), they are between a rock and a hard place. The time for action was several years ago. Now they are just being stubborn.
“It’s important to remember that CalPERS is a long-term investor and one year of performance should not be interpreted as a signal about our ability to achieve our investment goals over the long-term,” said Henry Jones, Chair of CalPERS Investment Committee.
CalPERS 1 percent return is below the fund’s discount rate of 7.5 percent, a long-term hurdle lowered recently in response to a steady decline in inflation and as part of CalPERS routine evaluation of economic assumptions. CalPERS 20-year investment return is 7.7 percent.