Money & Company

Tracking the market and economic trends
that shape your finances.

Category: Pension funds

Real Estate | Autos | Consumer | Economy

Assets of major public pension funds slid 8.5% in third quarter

Third quarter pension fund holdingsThe stock market's summer slide took a toll on public pension funds, with the assets of the 100 largest ones down 8.5% in the third quarter of 2011, the Census Bureau reported Wednesday.

The quarterly decline was the first since early 2010, and the steepest since the fourth quarter of 2008, when the asset total plummeted 13.5% at the height of the global financial crisis.

The latest drop brought the value of investments and cash held by the biggest pension funds -- including the California Public Employees' Retirement System, the California State Teachers' Retirement System and the Los Angeles City Employees' Retirement System -- to $2.5 trillion on Sept. 30, down $236.6 billion from June 30. 

Driving the third-quarter decline was a 14.9% slide in the funds' corporate stock holdings, which at last count represented 30.4% of the funds' total assets.

The pension-fund numbers reflect the performance of financial markets in the third quarter, when stock prices worldwide tumbled as the European debt crisis intensified. The Dow Jones industrial average dropped 12% in the three-month period. But stocks have rebounded since the end of September, and it's very likely that pension fund holdings have bounced back as well.

RELATED:

S&P 500 enters positive territory for the year

CalPERS rolling out new computer system late and at higher cost

Consumer confidence up in December, nearing post-recession high

-- Jim Puzzanghera in Washington

 

 

Villalobos' attorneys drop him for not paying legal fees

Alfredjrvillalobosallenjschabenlatimes

 

A judge has tentatively approved a request by lawyers for former state pension fund official Alfred J.R. Villalobos to drop their client over unpaid legal bills.

The Cooley law firm in Palo Alto sought to be relieved from defending Villalobos in a state fraud lawsuit because Villalobos owes $3.5 million in legal fees and is unable to "pay for the fees going forward," Los Angeles Superior Court Judge John H. Reid ruled Wednesday in a tentative decision.

Villalobos' lawyers declined to comment on the judge's ruling. Villalobos could not be reached. However, in legal papers, Villalobos unsuccessfully argued that Cooley should not be relieved from representing him until a U.S. Bankruptcy Court in Reno, Nev., approves his hiring of new counsel.

"If this court grants Mr. Villalobos' request, it is likely that Cooley LLP will be forced to perform further work on behalf of Defendants without compensation," the judge ruled, denying Villalobos' request.

Villalobos, a former board member of the California Public Employees' Retirement System and vice mayor of Los Angeles, is being sued by the California attorney general's office on allegations he plied pension fund officials with luxury trips and gifts to influence investment decisions.

Villalobos and his firm, Arvco Capital Research of Stateline, Nev., earned more than $40 million in allegedly illegal commissions from helping private investment managers win $4.8 billion worth of deals from 2005 to 2009.

The lawsuit, filed May 5, 2010, alleges that Villalobos illegally sold securities without a broker-dealer license. It also alleges that Villalobos and a co-defendant, former CalPERS Chief Executive Federico Buenrostro Jr., violated state unfair competition laws.

Both men have denied the charges. Villalobos contended that he acted only as a "finder" and did not sell securities.

A hearing is set on the legal representation issue for 9 a.m. Thursday at Los Angeles County Superior Court in Santa Monica.

The hearing will also air arguments on an attorney general's motion asking the judge to issue a summary judgment finding that Villalobos and Arvco sold securities without a license. On Wednesday, Reid tentatively denied the motion.

No trial date has been set for the lawsuit against Villalobos and Arvco. Buenrostro, however, is scheduled for trial May 7.

RELATED:

Fraud case against Alfred Villalobos is revived

Scathing report cites CalPERS, former chief executive on Villalobos payments

State sues two former CalPERS officials

-- Marc Lifsher

Photo: Alfred J.R. Villalobos outside the Santa Monica courthouse after a hearing May 28, 2010. Credit: Allen J. Schaben / Los Angeles Times

State political watchdog fines CalPERS officials

CalPERS board
The state's political ethics watchdog agency has fined California pension leaders and investment officers thousands of dollars for failing to report gifts received from investment firms with whom they did business.

The action Thursday by the Fair Political Practices Commission -- levying 16 fines ranging from $3,600 to $200 -- underscored that the California Public Employees' Retirement System remains embroiled in a 2-year-old influence-peddling and public-corruption scandal.

Most of the fines were for not disclosing, as required by law, the receipt of meals and gifts such as wine, Rose Bowl football tickets and promotional items including backpacks and computer flash drives.

Commissioner Ronald D. Rotunda called the gift violations "heinous" because those involved are entrusted with investing the money of 1.3 million state workers, retirees and their families.

He noted that gift violations included the acceptance of sports tickets that exceeded limits on value spelled out in state law.

"You can just pay for your own baseball games or just don't go," Rotunda said.

The enforcement actions, he warned, put CalPERS management on notice that it needs to comply with all state ethics and financial-disclosure laws.

The law requires that state employees who receive gifts worth more than a combined $50 from a single source in a year must report the gifts in an annual statement filed with the FPPC. The maximum total value of gifts allowed in a year from a single source is $420.

The best-known names on the proposed fine list were CalPERS board President Rob Feckner and board member Louis F. Moret. Each was fined $400 for not reporting gifts of meals and drinks. The largest fine, $3,600, went to staff portfolio manager Shaun Greenwood for not disclosing 32 gifts.

Most of the gift-related information was provided to FPPC investigators by CalPERS staff at the request of Chief Executive Anne Stausboll, CalPERS said.

"We are fully committed to transparency, openness and the highest ethical standards as we work to uphold the public trust and protect the retirement and health security of our members," Stausboll said in a statement released by her office.

Nevertheless, CalPERS could have been more aggressive in encouraging its board and staff to comply, said Gary S. Winuk, the FPPC's chief of enforcement.

"I think they will tell you there was more they could have done to help employees comply with the [California Political Reform] Act," Winuk told the panel at its monthly meeting.

He stressed, however, that CalPERS officials fully cooperated with the FPPC investigation once it was opened.

The $221-billion CalPERS fund has been dealing with the fallout from an ongoing probe by federal and state law enforcement agencies into allegations that so-called placement agents -- outside deal-makers who bring together private investment managers and CalPERS -- were paid tens of millions of dollars in questionable fees.

The state attorney general's office is pursuing a lawsuit against one agent, former CalPERS board member Alfred J.R. Villalobos, who is accused of committing securities fraud, selling securities without broker-dealer licenses and violating state unfair-competition laws. Also named in the suit was Villalobos' business associate, former CalPERS Chief Executive Federico Buenrostro Jr.

RELATED:

CalPERS officials who received gifts may face fines

CalPERS investment stock portfolio hit in recent sell-off

CalPERS rolling out new computer system late and at higher cost

-- Marc Lifsher and Patrick McGreevy in Sacramento

Photo: The CalPERS board meets in its Sacramento headquarters. Credit: Robert Durell / For The Times

CalPERS board censures member after sexual harassment reprimand

CalpershqrichpedroncelliFTT

The board of the California Public Employees' Retirement System has censured board member J.J. Jelincic after he was officially reprimanded for sexually harassing co-workers when he was an investment officer at the pension fund.

Last year CalPERS officials punished Jelincic. The reprimand was upheld last week by the state Personnel Board.

Jelinic on Wednesday declined to comment on the board's action. Earlier he called the charges and subsequent discipline "politically motivated."

As part of the board's reprimand, Jelincic was stripped until March 1 of his position as chairman of the pension fund's investment policy subcommittee and vice chairman of the health benefits committee. He also lost most of his board travel privileges for the same period.

"The CalPERS board does not condone harassment or similar conduct of any kind, and all our board members are expected to meet this standard," said Rob Feckner, president of the board.

Feckner was fined $400 by the state Fair Political Practices Commission on Tuesday for failing to report certain meals and other gifts he received from investment managers as required by state law.

In May 2010, the CalPERS board censured member Priya Mathur after the FPPC ruled that she did not submit legally required statements of economic interest in 2007 and 2008. Mathur was fined $7,000 by the state.

RELATED:

CalPERS officials who received gifts may face fines

CalPERS board member Priya Mathur is fined $4,000

Scathing report alleges corruption at CalPERS

 -- Marc Lifsher

Photo: The atrium in CalPERS' headquarters in Sacramento. Credit: Rich Pedroncelli / For The Times

CalPERS drops suit against Fitch Ratings

Pers
The country's largest public pension fund, the California Public Employees' Retirement System, has dropped a lawsuit against Fitch Ratings without receiving any monetary settlement.

The 2009 lawsuit in San Francisco County Superior Court accused Fitch and two other rating firms, Moody's Investors Service and Standard & Poor's, of inflating the security rating of $1.3 billion in debt from three investment funds that were hit with large losses after the U.S. economy began to collapse in 2007.

CalPERS, however, said it is moving forward with the suit against Moody's and Standard & Poor's.

"Dismissal of the two Fitch defendants in the CalPERS complaint will streamline the litigation against two other credit rating agencies," CalPERS said. "CalPERS can still fully recover its damages if it prevails against Moody's or S&P, which will not be able to avoid liability through the Fitch dismissals."

In a statement, Fitch said it "is pleased with the resolution of this case and the disposition reached with CalPERS," according to the Reuters news agency.

Related:

Criticism of Standard & Poor's over U.S. credit rating compounds its troubles

Los Angeles to quit hiring Standard & Poor's

Fitch reaffirms USA's AAA credit rating

-- Marc Lifsher

Photo: CalPERS headquarters atrium. Credit: Rich Petrocelli / Associated Press 

CalPERS portfolio has lost $18 billion in value since July 1

 

After posting its best annual performance in 14 years, the California Public Employees' Retirement System is giving back a sizable portion of the 20.7% investment return it reported for the fiscal year that ended June 30.  Joe Dear 2

The value of the country's largest public pension fund was $220 billion at market's close on Monday, down 7.6% or about $18 billion, CalPERS said Tuesday.

"It's bad, but it's not 2008," said Joseph Dear, CalPERS' chief investment officer, in an interview on CNBC. "We have a crisis induced by lack of confidence in the U.S. and European political systems, combined with gloomier and gloomier economic growth forecasts."

Wall Street's massive stock sell-off that began last week "is a tipping point," Dear said, "but it's not a time to panic and run with fear out of the market."

CalPERS was underweight in its stock portfolio at the close of the last fiscal year and now is "considering whether we can go back in" to make long-term investments, Dear said.

Though Dear said he didn't expect the U.S. economy to fall into a double-dip recession, he conceded that the outlook for short-term growth was not rosy.

Those comments contrasted with Dear's enthusiasm for the 20.7% investment return that CalPERS announced on July 18, covering the 2010-11 fiscal year.

"The portfolio is quite healthy with positive benchmark-beating gains for nearly all of our assset classes over the past year," Dear said at the time. "Global equity [public stocks], private equity, fixed income, inflation-linked and cash equivalents all did well, and our real estate portfolio is back in positive territory after reversals during the financial crisis and recession."

CalPERS' portfolio value dropped from a historic high of $260.4 billion in October 2007 to $160 billion in March 2009. It has since risen to a high of $237.5 billion on June 30 before dropping to $220 billion on Monday.

CalPERS' gains during the year ending June 30 were roughly in line with other large institutional investors, according to a report issued Tuesday by the Wilshire Trust Universe Comparison Service, which serves as a performance benchmark for similar investors.

The median return for all large institutional investors was 20.12%, the best showing since 1986, the report said. Public plans such as CalPERS posted a median return of 21.1%, corporate plans 20.4%, nonprofits 20% and labor union plans 19.9%, the report said.

-- Marc Lifsher in Sacramento

Photo: CalPERS Chief Investement Officer Joseph Dear. Credit: Los Angeles Times photo

RELATED:

State pension agency slashes benefits for top officials

California pension funds post big annual gains

Scathing report alleges corruption at CalPERS

 

 

 

 

 

CalPERS and CalSTRS both see big gains

The nation’s two largest pension funds both posted their best returns in more than a decade.

The California Public Employees' Retirement System pension fund grew 20.7% in the fiscal year ended June 30, its best return in 14 years. The California State Teachers’ Retirement System fund increased  23.1%, the best it has done in a quarter of a century.

Despite the record increases, neither fund has recovered the massive losses they both experienced during the financial crisis and the returns will not immediately lower the contributions expected from employees or the state.

“It’s a good year. CalPERS is clearly back -- but we have a lot of work to do,” said Joseph Dear, CalPERS' chief investment officer.

The good returns at both funds were led primarily by the rising stock market, which increased even more than the funds as measured by the Standard & Poor’s 500 index. The S&P 500 rose 28.1% during the same time period.

CalSTRS' stock portfolio rose 31.9% while CalPERS' rose 30.2%. The private equity portfolios at both funds also did well, increasing 25.3% at CalPERS and 22.5% at CalSTRS.

The results were pulled down by the bond portfolios, which did well last year, and real estate holdings, which continue to struggle. The bond portfolio increased 7% at CalPERS and 5.4% at CalSTRS, while the real estate holdings rose 10.2% in value at CalPERS and 17.5% at CalSTRS.

-- Nathaniel Popper

A comfortable retirement? Be a '10-Timer'

Want enough money to carry you through your golden years? Then save at least 10 times your annual salary by retirement.

That's the allegedly "simple" goal that a new study exhorts Americans to pursue.

"Too few Americans are saving sufficiently to provide for themselves in old age," says the study by Lincoln Financial Group. "What is needed is a simple way to encourage and empower individuals to save."

There is a hitch: Only 11% of the retirees surveyed succeeded in becoming so-called 10-Timers.

Nevertheless, says the study, the rest of us can learn something from those fortunate enough to hit the mark.

To calculate where you stand, tally your total savings -– checking accounts, mutual funds, 401(k)s, etc. -– minus all non-mortgage debt. (Real estate is excluded in this equation.) Then, divide your net savings by your annual income.

(The figures all are pre-tax. So use your gross income and the current amount in tax-deferred retirement accounts.)

It's worth noting that there's nothing scientific about saving 10 times your income. It's just an easy-to-understand figure and 10-Timers report being successfully retired, according to a Lincoln Financial spokeswoman.

10-Timers share a few obvious savings traits, including contributing to workplace retirement plans and following clear investment strategies, such as relying on index funds.

Most interesting, almost three-quarters made the most of "power-savings years" when they had extra money o salt away. And it's especially helpful to do that early in your career, according to the study.

While power-saving between ages 40 and 50 was twice as common among 10-Timers, it was three times as common from 30 to 40.

"Steadily saving a modest amount each year is important, but is probably not enough by itself" to achieve 10-Timer status, according to the study.

That's dispiriting for anyone hoping that slow and steady will win the race. But at least after running these numbers you'll have an idea of how far behind you are.

–- Walter Hamilton

CalPERS names new private equity investment executive

The California Public Employees' Retirement System, the country's largest public pension fund, has named an investment executive to run its $49-billion private equity investment portfolio.

Real Desrochers, who spent a decade doing a similar job for the California State Teachers' Retirement System, replaces Leon Shahinian, who resigned in August after being caught in a spreading CalPERS corruption scandal.

Private equity generated annual returns of more than 17% for the teachers' fund under Desrochers' leadership in the decade before 2009, CalPERS Chief Investment Officer Joseph Dear said.

Earlier in his career, Desrochers worked for Canada's largest pension fund, Caisse de Depot of Quebec. After leaving CalSTRS, he advised a number of investors, including Blackstone Capital, J.H. Whitney, Texas Pacific Group, Permira and China Renaissance Industries. He also was chief investment officer for the Saudi Arabian Investment Co.

Desrochers joins CalPERS as the country's largest public pension fund, with $236 billion in assets, is clawing its way back from losing $100 billion between late 2007 and early 2009. The fund reached an all-time high of $260 billion in October 2007 before the Great Recession hit.

CalPERS currently faces more than financial difficulties. The 2,300-person agency, which serves 1.6 million state and local workers, their families and retirees, also is facing a morale crisis as it seeks to deal with a so-called pay-to-play scandal that has touched three former board members, a former chief executive and a number of outside investment consultants and managers.

Shahinian was mentioned in a 2010 state attorney general's lawsuit for taking gifts of luxury travel to New York City to attend a charitable dinner honoring the chairman of Apollo Global Management, Leon Black.

Alfred J.R. Villalobos, a former CalPERS board member turned middleman dealmaker, picked up most of Shahinian's tab on behalf of his client, Apollo. The gifts to Shahinian were not reported as required by state law.

Shahinian later recommended that CalPERS purchase a 9% stake in Apollo.

Neither Shahinian nor Black have been charged with any wrongdoing.

-- Marc Lifsher

State contribution to CalPERS pensions to drop

The state of California is getting a slight break on its pension bill for the upcoming spending year.

The California Public Employees' Retirement System on Tuesday reported that the state's contribution for the fiscal year that begins on July 1 will be $170 million less than previously estimated.

The biggest factor in the savings is an agreement by state worker unions to hike employees' contributions to the cost of their own retirements. Employee contributions are going up by between 2% and 5%, CalPERS said, and in the aggregate are forecast to total $1.3 billion in the 2011-12 fiscal year.

Lower-than-expected salary raises and smaller cost-of-living increases also helped reduce the pension burden on the state budget.

As a result, the state's total contribution to CalPERS will be $3.51 billion instead of $3.68 billion, CalPERS said.

"Pensions are a shared responsibility, and our members in some cases are paying half the normal cost of pensions," said CalPERS board President Rob Feckner.

The slight reduction in annual state pension costs is unlikely to dampen an increasingly hot debate about the future and the sustainability of state and local government pension obligations.

Gov. Jerry Brown is working on a proposal to reduce pension costs that he hopes to present to Republican lawmakers as part of ongoing budget and tax-increase negotiations. Meanwhile, proponents of an initiative that would convert state retirement benefits to a 401(k)-type system are organizing to put a measure on the ballot sometime next year.

-- Marc Lifsher

CalPERS divesting from companies operating in Iran, Sudan

The country's largest public pension fund is selling all its stock in companies that continue to operate in Iran and Sudan.

The California Public Employees' Retirement System announced Monday that it is fully complying with state divestment laws passed in 2006 and 2007.

Iran and Sudan are subject to U.S. economic sanctions. Iran has been identified as a state sponsor of terrorism, and Sudan has been cited for genocidal acts against the inhabitants of the Darfur region.

Calperslogo CalPERS said it would sell approximately $160 million in stock in eight companies operating in the energy and other sensitive economic sectors of the two nations. At one point in the last decade, the retirement fund owned more than $2 billion worth of shares in 47 companies that did business in Iran and Sudan. Those shares have been gradually removed from the fund's portfolio.

CalPERS declined to name the eight companies, saying it did not want to reduce the stocks' value before selling.

"The cost of continuing to hold the stock of these eight companies is greater than the value of divesting them," CalPERS board President Rob Feckner said. "Consistent with our fiduciary duty as trustees, we're taking this step in the best interest of the fund."

CalPERS' decision was greeted with satisfaction by state Sen. Joel Anderson (R-El Cajon), the author of a bill pending in the Legislature that would force CalPERS and its sister pension fund, the California State Teachers' Retirement System, to sell its Iran- and Sudan-related holdings.

"For too long, CalPERS and CalSTRS have helped fund a violent regime in Iran," Anderson said."Money is the mother's milk of terrorism."

Anderson said he intends to keep moving his bill, SB 903, to make sure that any divestment action is permanent.

-- Marc Lifsher

Connect

Recommended on Facebook


Advertisement

In Case You Missed It...

Video




Categories


Archives