Calpers To Report Losses of 103% on its Residential Investments

[girl gone mad]

From Global Economic Trend Analysis:

CalPERS, the California Public Employees' Retirement System announced a new milestone in pension plan incompetence today by admitting losses in http://online.wsj.com/article/SB122947172015212225.html?mod=testMod">Risky, Ill-Timed Land Deals.

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.

Calpers in recent weeks said it expects to report paper losses of 103% on its residential investments in the fiscal year ended June 30. That's because Calpers invested not only its own money, but billions of dollars of borrowed money that must be repaid even if the investment fails. In some deals, as much as 80% of the money invested by Calpers was borrowed. ... Rest by Subscription

For some strange reason this news is not listed under the news category on the CalPERS Website.

Instead I see an article that says "CalPERS is Resilient in Market Downturns"

The news in the financial markets can be alarming for our members, but it is important for you to know that the current credit crisis does not affect our ability to pay benefits. It is also important to note that your retirement benefits are protected by law. The pension system is designed to withstand market fluctuations.

The Calpers website fails to point out just just how it guarantees those benefits. The WSJ article spells it out nicely: "California's cities, towns and schools may have to cough up more money to cover the retirement and other benefits the fund provides for 1.6 million state workers."

Here's the deal. CalPERS can and clearly does gamble with pension money. If it loses, California taxpayers will have to pick up the tab.

Is this a great system or what?

http://globaleconomicanalysis.blogspot.com/2008/12/calpers-to-report-losses-of-103-on-its.html

[Ecumenist]

1. Whose bright idea what this to do something so crazy?

If I was intuitive enough to know to be careful about dumping my money into real state and realised that the market was not as great as it was made up to be, how did thery make this HUGE mistake....COSTLY, HUGELY COSTLY MISTAKE??!!

[BR_Parkway]

2. So now what? Can they just give everyone who retires a free and clear

house?

Once again, greed and speculation - borne by those who can afford it the least

[mike_c]

3. I could have gone all day without reading this....

Yep, I'm a California state employee.

[damntexdem]

4. Great, one of my pensions comes from CalPERS.

And GOP governors are always trying to raid the system, even apart from this fiasco.

[kiranon]

5. Gov. Pete Wilson privatized CALPERS investment decisions

Don't recall all the facts, but I believe when Gov. Wilson came in to office a woman government official had been doing the investments for CALPERS for quite a number of years. She was conservative in her approach to investing and had a great track record. Gov. Wilson soon dropped her as the investment person and moved the investing part over to outside people - more privatization. CAPERS decision to invest in real estate when it was known that the economy was tanking should be investigated to see if anyone's finances/land deals were saved with CALPERS funds. Attorney Jerry Brown where are you? Class action suit time? Something needs to be done to look into this mess to find out what happened and why.

[dixiegrrrrl]

6. Jerry Brown was mayor of Oakland last time I heard.

did he move onto something else?

[NMDemDist2]

7. isn't he AG now in Cali? n/t