CA pension loses 25% of assets since July 1 due to real estate investments

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CA pension loses 25% of assets since July 1 due to real estate investments

Sunday, December 21st, 2008 | Economics |

Wall Street Journal - Risky, Ill-Timed Land Deals Hit Calpers:

At the height of the property bubble, California’s giant pension fund, Calpers, made a fateful decision: It aggressively poured money into real estate. As a result, today it’s one of the biggest owners of undeveloped residential land in America.

Partly because of these investments, California Public Employees’ Retirement System is struggling to avoid one of its worst annual declines since its 1932 inception. Calpers has lost almost a quarter of its assets since July 1, the start of the current fiscal year.

The problems come at a time of uncertainty for the nation’s largest public pension fund, which has been without its top two executives for nearly half a year. Calpers is poised to appoint a new chief executive as early as this week, people familiar with the matter said.

Calpers is now warning California’s cities, towns and schools that they may have to cough up more money to cover the retirement and other benefits the fund provides for 1.6 million state workers. Some towns are already cutting municipal services, and at least one is partly blaming the Calpers fees.

Via Mish. W.C. Verone called it in July, citing the implausibly rosy numbers CALPERS reported for its real estate investments (emphasis mine):

While things that have easily observable market prices (i.e. stocks) went down, everything that is valued subjectively went up! Private equity? It does great during a credit crunch when stocks are crashing! Just ask noted private equity players Blackstone Group or Babcock & Brown. And real estate? Well, whose real estate portfolio is not up at least 8% this year?

Mark my words: CalPERS is lying about its performance, and there will be serious consequences for California retirees and taxpayers.

Previously:

Tags: california

1 Comment to CA pension loses 25% of assets since July 1 due to real estate investments

More on the public/private pension fund disparity | Les Jones
February 9, 2009

[...] check the story for Rod Blogojavich’s CALPERS-style desperation move to save the Illinois pension fund. With pensions seriously underfunded in [...]