 |
|
| Author |
CalPers Feels the Heat Replies |
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11253
Location: Los Angeles, California
|
|
| Back to top |
|
 |
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11253
Location: Los Angeles, California
|
 Posted: Mon May 23, 2011 8:12 am Post subject: |
 |
|
CalPERS' investment staff feeling more heat. Courtesy of peHUB:
| Quote: | Scoop: Dozens of CalPERS Investment Staff Facing Fines
By: Jonathan Marino
Several dozen members of the California Public Employees’ Retirement System investment staff apparently are facing disciplinary action and fines from the state’s Fair Political Practices Commission, peHUB has learned.
The potential fines are the latest in a series of damaging revelations regarding the pension fund’s disclosure of financial statements and relationships with private service providers, and could hasten the flow of executives from CalPERS.
Last Wednesday, pension fund CEO Anne Stausboll addressed more than 200 CalPERS investment staff employees in a closed session meeting. At that meeting, between 50 and 60 staffers at varying levels of the CalPERS investment team were told they faced warnings and possible fines of $200 to more than $20,000, two sources with knowledge of the meeting said. The staffers have until June 3 to decide whether to pay fines and accept disciplinary action or to proceed with public hearings.
One source at CalPERS, who attended the meeting and confirmed the potential fines, told peHUB the pension fund has been under increasing pressure to curb staff involvement with sponsored industry events, and that the fines pertain specifically to this. State law requires investment office managers to be provided with ethical guidelines training.
“It’s nearly all the people who do investments” that are facing fines, the source said. The fines stem from conduct over the last five years, the source said.
CalPERS has sought to implement tighter personnel guidelines in the last two months in the wake of the release of an audit by Steptoe & Johnson, which came at the pension fund’s behest and identified misconduct and ethical breaches committed by staff.
The report recommended CalPERS establish “stringent new procedures [for employees] when traveling for meetings with investment managers, including prohibiting staff from accepting gifts of entertainment and meals held apart from business meetings.”
CalPERS was not available for comment despite several phone calls and e-mail messages.
This is not the first time in recent years CalPERS officials have found themselves facing penalties from the California Fair Political Practices Commission. Board member Priya Mathur last year was dealt the most recent in a series of fines after being too slow in reporting financial disclosure statements. Another board member, Charles Valdes, was fined in 2009 for accepting donations for a campaign runoff years prior that exceeded the limit.
Sources did not identify any of the CalPERS staff currently facing fines from the state commission.
The pension is facing an exodus by investment office management already. Senior portfolio manager Joncarlo Mark left the pension fund in February and Mike Dutton, an alternative investment portfolio manager, departed around the same time, as did James Lasher, a real estate portfolio manager. Lorne Johnson, a portfolio manager for asset allocation, left CalPERS last week, one source told peHUB. Johnson’s LinkedIn profile continues to list him as a current employee.
Reports on CalPERS’ staffing woes cite executives that argue the pension’s rules regarding professional relationships are too restricting. One source said the fines could damage investment staffers’ career prospects outside the pension.
CalPERS has been under heavy scrutiny internally and from investigators including the S.E.C., according to published reports, as the pension responds to investigations and law suits stemming from investment managers’ relationships with placement agents. |
|
|
| Back to top |
|
|
nodoodahs
Moderator
Joined: 06 May 2005
Posts: 2408
|
| Posted: Fri Oct 08, 2010 2:51 pm Post subject: |
|
|
Mercer is exiting the U.S. public DB investment consulting business ...
http://www.pionline.com/article/20101008/DAILYREG/101009917
_________________
I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose. |
|
| Back to top |
|
|
nodoodahs
Moderator
Joined: 06 May 2005
Posts: 2408
|
|
| Back to top |
|
|
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 16421
Location: Sunny California
|
|
| Back to top |
|
|
rffrydr
Moderator
Joined: 30 Oct 2005
Posts: 16421
Location: Sunny California
|
|
| Back to top |
|
|
nodoodahs
Moderator
Joined: 06 May 2005
Posts: 2408
|
| Posted: Thu Sep 16, 2010 8:21 am Post subject: |
|
|
Thanks for the link. Did I read this wrong?
| Quote: | | 10. The terms of many defined benefit pension plans base the amount of an employee’s pension benefits in part on the employee’s final salary level or final-average salary level. When that is the case, the Board believes that the projection of benefit payments should include expected future salary increases because final-pay or final-average-pay-based benefits effectively incorporate future salary levels into the terms of employment exchanges throughout an employee’s career. The Board considered but rejected the view that measurement of the total pension liability should take into consideration only employees’ salaries to the date of the measurement. As noted above, the Board believes that annual employment exchanges between the employer and the employee should be viewed as occurring as part of an employee’s career-long employment relationship with the employer. The Board believes that including an expectation of future salary increases in the projection of benefit payments better reflects this view and, therefore, contributes to a more decision-useful attribution of the service-cost component of pension expense over the course of an employee’s career. |
Also on page 14 with COLA
| Quote: | | 7. Automatic COLAs are those that explicitly are part of the terms of the pension plan and, therefore, constitute part of the employment exchange each period. In the context of these preliminary views, automatic COLAs are any COLAs that occur without a requirement for a decision to grant by a responsible authority, including those for which the amounts are determined by reference to a specified experience factor (such as the earnings experience of the plan) or to another variable (such as an increase in the consumer price index). Because automatic COLAs are part of the employment exchange, the Board believes that they are an integral part of an employer’s present obligation to its employees to provide pension benefits. Therefore, the Board believes that the effects of automatic COLAs should be included in the projection of benefit payments for accounting and financial reporting purposes. |
So it seems to me that there IS a bit of circularity there, in that lower interest rate environments are predictive of future CPI changes (10YT yield has correlations of 48, 42, 35, and 22 percent to CPI changes over the next 1, 2, 5, and 10 years) and supposedly are indicative of future expectations of inflation (the correlations above are linear and are screwed up by the overexpectation of continued CPI “inflation” in the early 1980s).
Lower yield environment => lower bond returns => lower COLA going forward
Now, to the extent that pension consultants don’t include a provision to modify future salaries and/or COLAs in their funding analysis, it seems they are overly conservative i.e. underestimating of funding levels.
This doesn’t do anything for the state pensions that can’t even meet current payment obligations however. They are morphing (have already morphed/?) into Ponzis and PAYGOs.
_________________
I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose. |
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11253
Location: Los Angeles, California
|
| Posted: Thu Sep 16, 2010 12:21 am Post subject: |
|
|
Hey Bill,
Sorry for the late response. GASB is revising the rules regarding liabilities measurement for public pension plans:
http://www.gasb.org/cs/ContentServer?c=Document_C&pagename=GASB/Document_C/GASBDocumentPage&cid=1176156938122
See page 15 regarding expected salary increases. At this point, under GASB rules, projected salary increases for active employees are not taken into account, so yes, the point is moot. And even if projected salary increases are taken into account, lower asset return assumptions/discount rate shouldn't affect how much raises public employees receive--as these are two separate issues (at least under pension accounting).
The deficits are going to get much larger from an accounting standpoint.
Best,
Henry |
|
| Back to top |
|
|
nodoodahs
Moderator
Joined: 06 May 2005
Posts: 2408
|
| Posted: Wed Sep 15, 2010 2:42 pm Post subject: |
|
|
| nodoodahs wrote: | Yeah I read about their proposed reclassification of investment categories and had to do TWO facepalms. Ugg.
Question for you Henry: to what degree are return assumptions in pensions circular?
Example, you have an assumed discount of 7.75 and decide to move it down to, say, 7, based on a projection of a lower-growth environment in the future. So your funding level drops. But shouldn't your future obligations drop to some extent as well, if you're projecting a lower-growth environment? Current DB obligations are set, but futures are based on N employees working X years getting Y percent raises per year until retirement, right? If growth is lower shouldn't the projected salary increases be lowered along with your expectation of future growth? |
I still have the question, above: to what degree are return assumptions circular, because lower future growth assumptions allow you to lower your expectation of future obligations to employees that haven't retired yet (since you won't be giving them big raises because growth is lower)?
However, it appears many of the state systems are so deeply messed up that my question above is moot. After all, it's not even a question of future obligations to current retirees ... it's a question of immediate cash flow ...
http://www.pionline.com/article/20100915/DAILYREG/100919941
| Quote: | | Less than half the 50 state retirement systems had assets to pay for 80% of promised benefits in their 2009 fiscal years, according to data compiled for the Bloomberg Cities and Debt Briefing in New York on Wednesday. |
_________________
I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose. |
|
| Back to top |
|
|
nodoodahs
Moderator
Joined: 06 May 2005
Posts: 2408
|
| Posted: Mon Sep 13, 2010 5:10 am Post subject: |
|
|
Yeah I read about their proposed reclassification of investment categories and had to do TWO facepalms. Ugg.
Question for you Henry: to what degree are return assumptions in pensions circular?
Example, you have an assumed discount of 7.75 and decide to move it down to, say, 7, based on a projection of a lower-growth environment in the future. So your funding level drops. But shouldn't your future obligations drop to some extent as well, if you're projecting a lower-growth environment? Current DB obligations are set, but futures are based on N employees working X years getting Y percent raises per year until retirement, right? If growth is lower shouldn't the projected salary increases be lowered along with your expectation of future growth?
_________________
I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose. |
|
| Back to top |
|
|
diesel
Moderator
Joined: 05 Oct 2006
Posts: 793
Location: Australia & New Zealand
|
| Posted: Mon Sep 13, 2010 4:52 am Post subject: |
|
|
It already looked a lot like a hedge fund to me. Maybe 2nd time lucky. 
_________________
All cats are gray in the dark. |
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11253
Location: Los Angeles, California
|
| Posted: Mon Sep 13, 2010 4:19 am Post subject: |
|
|
Wow--Mr. Dear of CalPERS has certainly read a lot of books on investing (mostly worthless) but he probably has never read anything on Livermore or Soros. Good luck in turning a $200 billion pension fund into a nimble hedge fund, and doing it with traders who get paid minimum wage.
| Quote: | | For Dear, his job is to retool a vast retirement fund so it thrives in a perilous era, and his beneficiaries, and California taxpayers, are counting on him to succeed. His mission boils down to one essential element: “I have 7.75 burned in my brain, and I’m preoccupied with what we’re doing to get it,” he says. |
http://www.bloomberg.com/news/2010-09-09/calpers-after-scandal-embraces-risk-for-pensioners-facing-240-billion-gap.html |
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11253
Location: Los Angeles, California
|
| Posted: Tue Apr 20, 2010 1:43 am Post subject: |
|
|
CalPERS changes its investment policy in real estate:
------------------------------------------------------------------------------------
CalPERS changes policy on real estate investing
Calif. pension fund changes policy on real estate investing to protect low-income residents
SACRAMENTO, Calif. (AP) -- The nation's largest pension fund on Monday changed its policy on investing in real estate to balance its socially responsible investment philosophy with its quest for profits.
The decision came after the California Public Employees Retirement System, which manages about $210 billion in assets, saw its real estate portfolio lose nearly half of its value from September 2008 to September 2009.
As of Friday, CalPERS' total real estate portfolio was worth about $14.8 billion.
Some of the biggest losses came from investments in real estate ventures whose financial success depended on pushing low-income residents out of rent-controlled housing.
The revised policy, adopted at a CalPERS board meeting Monday, says the fund will not participate in investment strategies that rely on eliminating rent-regulated housing or raising rents above regulated levels.
CalPERS is known for its influence on socially responsible investing. Earlier this year, it voted to remove the limit on the number of shareholder proposals it can issue to companies in its portfolio, a change that could boost its influence among publicly traded companies.
Monday's action by the nation's largest pension fund could encourage other large investors to adopt similar policies.
CalPERS has had a practice of trying to invest in projects that will help low-income tenants. But critics say the funds cannot make money off such investments unless tenants enjoying regulated rental rates are pushed out of their homes to make room for people who will pay more.
CalPERS wants to balance a socially responsible investment philosophy with the need to ensure adequate long-term returns for its pensioners.
"The intent is to prevent us from investing in those strategies that are not well intended and had tenant impacts that were unacceptable to staff," Laurie Weir, CalPERS' real estate portfolio manager, told the board. "We really are trying to prevent those tenant impacts that we have seen over the past year."
A real estate investment that went bust in New York last year prompted CalPERS to re-evaluate its approach to that aspect of its portfolio.
CalPERS lost $500 million in a failed investment in Stuyvesant Town and Peter Cooper Village in New York that displaced low-income residents. The California State Teachers' Retirement System lost $100 million in the same deal.
The policy change was prompted by both those real estate losses and the risk to CalPERS' reputation, said spokesman Brad Pacheco.
CalSTRS is also considering a policy that would ban investments in strategies that are intended to capitalize on displacement of low-income households, spokesman Ricardo Duran said in an interview.
"Public pension funds should not be used to evict working people from their housing," said Dean Preston, an advocate for the group Tenants Together.
Preston said about 1,500 residents were displaced from a property called Page Mill in East Palo Alto, Calif. CalPERS invested in that property and lost another $100 million.
"We think this decision is a milestone," Preston said after the meeting. "We hope that it makes it more difficult for investors making this type of investment to accomplish their goal." |
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11253
Location: Los Angeles, California
|
| Posted: Wed Feb 24, 2010 2:16 pm Post subject: |
|
|
CalPERS feels more heat in its investments in Carlyle, Apollo, and Silver Lake. Note that Blackstone's stock price has risen 40% since July 1, 2009, so these numbers are very dated (although still telling):
http://www.pehub.com/64216/calpers-comes-clean-on-pe-firm-valuations/
| Quote: | The oldest of the three investments is in The Carlyle Group, with CalPERS paying $175 million for a 5.5% stake in early 2001. That investment was valued at $242 million as of June 30, 2009 — thus valuing Carlyle at approximately $4.4 billion. Pretty good deal, except when one realizes that CalPERS carried its Carlyle stake at a whopping $925 million as of June 2008 (for a firm value of nearly $17 billion).
In 2007, CalPERS invested around $581 million into Apollo Management, in exchange for around a 9% stake (yes, this was a deal brokered by Al Villalobos). CalPERS reports that the stake was valued at just $124.6 million as of June 30, 2009. This is a major drop from the $412 million carrying value on year earlier, and would value Apollo at around $1.38 billion.
Finally, there is Silver Lake Partners. CalPERS was carrying its $275 million investment at cost in the 2008 report, because it was so new. One year later, that figure dropped to $162.33 million. The position represents a 9.9% ownership stake in Silver Lake, thus valuing the tech-focused firm at around $1.64 billion.
All together, CalPERS invested around $1.03 billion into the three firms (not including individual fund commitments). The aggregate carrying value through last summer was just $528 million… |
|
|
| Back to top |
|
|
HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11253
Location: Los Angeles, California
|
|
| Back to top |
|
|
Please log in to view without the ad banners |
|
|
|
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum
|
|
FAQ
Search
Memberlist
Usergroups
Statistics
Register
Profile
Log in to check your private messages
Log in
