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Posts Tagged ‘calpers’

County Pension System Risks vs 401

Tuesday, January 22, 2013
posted by B-Daddy

The U-T has a great article on changes in the portfolio mix of the San Diego County employee pension fund.  In 2009, the county fired the fund manager after losses totaling $2 billion in 2008.  Assuming that the fund had about $9 billion at the time, that is a loss of 22%, compared withan an S&P loss of 37% for the same year.  Taken in context that doesn’t seem that bad.  The new fund managers have shifted the mix to include emerging market debt (Russia, Brazil and Mexico) as well as in hedge funds.  I find the 2 basis point (2%) management fee in the new contract to be too high.  Fees are a drag on performance, and frankly, the county should be shooting for something closer to 1%.   Correction: A commenter pointed out that two basis points is .02%, not 2%. I should have checked the math. The fees compare favorably with the Federal Government’s Thrift Savings Plan. I wouldn’t mind hearing from any professional financial planners on this subject.  I am not qualified to say whether the investment strategy is good or not, I just know that above average returns generally do not prevail.

Well, that’s not what Jerry Brown and legislative Democrats claim their bill would do, but how can we doubt that wouldn’t be the effect.  Here is what they are claiming, as reported in the SacBee:

The goal is to create a savings program in which workers who have no access to a pension can count on a guaranteed rate of return for contributing about 3 percent of their salary.

Sounds laudable? But who will control the money? Who will guarantee the rate of return?  According to the article, private insurers would, because:

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