CalPERS Must Stop Spinning, Part II
In response to a press inquiry about CalPERS’s recent board decision to require greater pension contributions from state and local governments, a CalPERS board member had this to say about investment markets:
“The last 10 years [have] been fairly stagnant.”
Really?? The Dow Jones Industrial Average is 61% higher than ten years ago. The NASDAQ is up 127%. Neither meets the definition of “stagnant.”
CalPERS’s Funded Ratio — ie, the ratio of pension assets to liabilities — has plummeted not because of stagnant growth of assets but because of rapid accretion of liabilities, as explained here. This is another reason CalPERS should bifurcate the discount rate and investment return assumption, as explained here.
CalPERS counts on the public not knowing financial truths. That must change. When communicating with the public, CalPERS should hold itself to the same standards it imposes on entities in which it invests.