Mulligan
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- May 3, 2009
- Messages
- 9,343
GregLee said:I don't think that's where the problem lies with public pension funds. The 8% assumed return is nominal, I believe, but in nominal terms, the market has not been flat for a decade. The Hawaii retirement portfolio (as I posted previously) has done quite well recently (though the fund has a large unfunded liability):
I agree with you that it isn't the pension systems fault. I'm just speaking in generalities which is always subject to some inaccuracies, but for example the the S and P 500 is lower now than what it was 11 years ago. I understand you can ride the wave buying low and selling high, but you have to be good at it. I'm sure you know a couple of 20% increases don't make up for a 30% downdraft most funds took a few years ago, with the assumed 8% marching on yearly. I imagine most fund systems requires a certain percentage of assets in short/long bonds and maybe some cash. This really puts the managers in a bind hoping equities perform above that. Our pension director who runs the 30 billion dollar fund, admitted in a meeting I attended that consistent 8% return is unrealistic with today's interest rates and they cannot earn their way out of the 07-08 downturn even though the system returned more than 20% last fiscal year. Hence, the reason for my pension becoming a COLA light instead of full COLA this year. Maybe things will change, I hope, but next fiscal year sure isn't off to a great start for the systems.