OMERS Reports First Annual Loss Since Financial Crisis

Link: https://www.ai-cio.com/news/omers-reports-first-annual-loss-since-financial-crisis/

Excerpt:

Canada’s Ontario Municipal Employees Retirement System (OMERS) reported a 2.7% loss last year, well off its benchmark’s return of 6.9%. It’s the first time the pension fund has seen a loss since the financial crisis of 2008.

As a result, the fund’s total net assets declined to C$105 billion ($82.4 billion) from C$109 billion. The fund also reported three-, five-, 10-, and 20-year annualized returns of 3.7%, 6.5%, 6.7%, and 6.0%, respectively.

Author(s): Michael Katz

Publication Date: 1 March 2021

Publication Site: ai-CIO

With lower returns on the horizon, public pensions will turn to riskier assets, Moody’s says

Link: https://www.marketwatch.com/amp/story/with-lower-returns-on-the-horizon-public-pensions-will-turn-to-riskier-assets-moodys-says-11614289692?mod=dist_amp_social

Excerpt:

State and local government pension systems are increasingly dependent on investment returns, and at risk of increasingly volatile results, as funding levels remain depressed and systems increasingly start to pay out more than they take in, according to a new report from Moody’s.

The credit-ratings agency anticipates higher volatility and lower returns across asset classes in 2021 compared to 2020, even as many pension sponsors have spent the past few years lowering their assumed returns from previous loftier targets that they rarely hit.

“With persistently low interest rates for high-grade fixed-income securities, public pension systems continue to rely on highly volatile equities and alternatives to meet return targets, posing a material credit risk for some governments,” the Moody’s analysts wrote.

Author(s): Andrea Riquier

Publication Date: 25 February 2021

Publication Site: MarketWatch

N.C. treasurer announces move to make state pension plan less risky for taxpayers

Link: https://www.carolinacoastonline.com/regional/article_c65c2932-6633-11eb-8288-1f1410ad3f83.html

Excerpt:

In a move that will make government-employee pensions less risky for taxpayers, N.C. Treasurer Dale Folwell announced Tuesday, Feb. 2, that the assumed rate of return on the main state retirement plan will be lowered.

Folwell and the Retirement Systems Division said the assumed rate of return for investments in the North Carolina Retirement Systems Fund will be reduced from 7% to 6.5%. The move was unanimously approved by the boards representing teachers, state employees and local government employees on Jan. 28.

Lowering the rate requires greater contributions from state and local governments, but keeps debt from piling up in the long term.

Author(s): Johnny Kampis, Carolina Journal

Publication Date: 3 February 2021

Publication Site: Carolina Coast Online

How the Federal Reserve’s Actions and Low Interest Rates Impact Public and Private Retirement Savings

Graphic:

Excerpt:

The extended period of low interest rates we’re in is not only creating challenges for public pension systems across the nation, but it is also negatively impacting people who are relying on their own savings to fund their retirements.

A common strategy for generating retirement income is to invest savings from an individual retirement account (IRA) or 401(k) into income-producing assets such as corporate bonds. But interest rates on corporate bonds have been falling in recent decades, reaching multi-decade lows in 2020.

Author(s): Marc Joffe

Publication Date: 20 January 2021

Publication Site: Reason

Editorial: Marin pension changes are painful but necessary

Excerpt:

The combination of reality and responsible caution is getting expensive for Marin public agencies that provide their workers with generous pensions.

The member agencies in the Marin County Employees’ Retirement Association are getting the latest dose and the association’s board voted to reduce its annual assumption rate on investment returns to 6.75%. It is a quarter of one percent reduction, but one that will cost agencies such as the county and the city of San Rafael thousands of dollars every year.

….

It recognizes a combination of expected returns on its stock market and real estate investments and that the number of pensioners is not only growing, but they are living longer and drawing more from the fund.

Living longer may be great news for the retirees, but it is an increased cost for MCERA.

Author(s): MARIN IJ EDITORIAL BOARD

Publication Date: 28 January 2021

Publication Site: Marin Independent Journal

Examining Private Equity in Public Pension Investments

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Excerpt:

However, there are reasons to be skeptical of public pension investment in private equity. While it is true that most private equity benchmarks outperformed the S&P 500 during the 2010s, it appears that public pension system investors did not benefit from this outperformance: their returns on public and private equity holdings were similar. Furthermore, it appears that private equity underperformed in 2020 and may not recover its edge in the decade ahead.

Over a long time period, annual returns on leveraged buyout funds are highly correlated with those of the S&P 500, raising questions as to whether private equity meaningfully adds to the diversification of pension system portfolios.

Pension systems should thoroughly evaluate the downsides of private equity investing before increasing their allocations to this asset class. These disadvantages include illiquidity, challenges in obtaining timely and accurate valuations, high investment costs, and lack of transparency.

Author(s): Marc Joffe

Publication Date: 27 January 2021

Publication Site: Reason

With Interest Rates Low, US Pension Funds Make Risky Investments In Emerging Market Debt

Excerpt:

In the United States, public pension funds, which have an average investment return target of 7.25 percent, will likely struggle to meet those investment targets and could be severely impacted by plummeting interest rates. Without changes to pension plans’ assumed rates of return, many public pension systems will see an increase in debt.

Unfortunately, many public pension plan managers are not interested in adjusting their investment return targets to realistic levels at this time. Instead, they are seeking riskier, potentially higher-yielding investments in an effort to make up for depressed interest rates and hit their targets.

Author: Swaroop Bhagavatula

Publication Date: 25 January 2021

Publication Site: Reason

CalPERS’ Former CIO on Saving America’s Public Pensions

Link: http://pensionpulse.blogspot.com/2021/01/calpers-former-cio-on-saving-americas.html

Excerpt:

Gordon thinks very highly of Ben Meng and so do I. I’ve had the pleasure of talking with him a few times since he was appointed CIO at CalPERS and not only is he brilliant, he was always very nice and generous with his time.

The last time I spoke with Ben was in the summer via a webcast where he explained that CalPERS is not leveraging its portfolio by $80 billion. We spoke about a few things and I recommend you read my comment here to gain an appreciation of everything he was tying to do at CalPERS.

That was before his crucifixion In August where he was forced to resign.  

I’m on record stating the way Ben Meng was treated was absolutely shameful and disgusting.

I don’t need to expand on this, suffice it to say CalPERS lost one of the best CIOs in the world and they still haven’t replaced him.

Author: Leo Kolivakis

Publication Date: 19 January 2021

Publication Site: Pension Pulse