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CalPERS Sees Unfunded Liability Rise to More Than $138 Billion

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By    |   Wednesday, 06 Dec 2017 11:00 AM

CalPERS, the biggest public employee pension system, saw its unfunded liability grow $27.3 billion to $138.6 billion in the fiscal year ended June 30, 2016, according to the annual financial report posted on its website.

The data lags a year, marking the end of a 12-month period in which the $344.4 billion system had a 0.61 percent investment return compared with the 11.2 percent return for the fiscal year ended June 30, 2017. CalPERS officials have estimated the system is 68 percent funded as of June 30, a drop from 68.3 percent a year earlier and 73.1 percent at the end of the 2015 fiscal year.

"CalPERS has demonstrated a troubling pattern of investments in social and political causes that are truly jeopardizing the retirement fund," said Tim Doyle, vice president for policy and general counsel at the American Council for Capital Formation, in a statement.

The business industry-backed Washington-based think tank blames CalPERS' muted investment results over the last decade on the system's increasing emphasis on sustainable investing strategies.

"During this time of increased ESG investing and activism, the fund's performance has suffered, converting a $3 billion pension surplus to nearly $140 billion deficit over the past 10 years," the report said.

The report also says CalPERS should stop its practice on engaging companies on sustainable investment practices and social and governance issues unless it show such practices are enhancing the company's value.

CalPERS earned a 4.4 percent annualized return for the 10-year period ended June 30 as it suffered through the financial crisis and stock market volatility, low fixed-income rates and the real estate collapse.

The think tank report blames the overall poor returns partly on a failed green investment policy. It cites four CalPERS private equity funds with a renewable energy/clean energy focus that were among the weakest performing of the 238 private equity funds CalPERS invested in for the one-year period ended March 31.

The funds are the Carlyle/Riverstone Renewable Energy Infrastructure Fund I with a -34.9% internal rate of return; Craton Equity Investors I, -19.9% IRR, Richardson Capital Private Equity Limited Partnership, -11.8% IRR; and the CalPERS Clean Energy and Technology Fund, -10.1% IRR.

But CalPERS' total investments in those funds combined is less than $650 million, according to CalPERS private equity reports.

CalPERS spokesman Joe DeAnda said in an email the American Council For Capital Formation report "cherry picked" its facts and noted the pension fund's overall $26 billion private equity portfolio had a 13.9% return in the latest fiscal year, Pensions & Investments reported.

He said CalPERS remains committed to ESG investing and putting pressure on companies to have environmental, social and governance policies.

"We have successfully pushed companies to publicly report on the impact that climate change is having on their business, and we have successfully pushed them to open up their board selection process because companies with a diverse group of talented people on their boards perform better financially," DeAnda said. "We stand behind our efforts. Any suggestion that we stop engaging with companies on behalf of our members is laughable."

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CalPERS, the biggest public employee pension system, saw its unfunded liability grow $27.3 billion to $138.6 billion in the fiscal year ended June 30, 2016, according to the annual financial report posted on its website.The data lags a year, marking the end of a 12-month...
calpers, pension, california, retirement
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2017-00-06
Wednesday, 06 Dec 2017 11:00 AM
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