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Calpers Considers More Than Doubling Bond Allocation To 44%
Thanks @Ted. Interesting story. Reading over PRWCX’s most recent report (June ‘17 I think) Giroux commented that if rates rose much more he’d increase his high quality longer dated bond position - mostly out of concern over equity valuations. He went further in saying he felt bonds would prosper if equities fell off a cliff. Well - rates are up. We’ll see if he followed through. Somewhat unrelated to the CALPERS story - except that both point to a growing concern about valuations among money managers. Guess a lot of us are waiting for “the jello to hit the fan”.
Here’s where I’d appreciate more insight from those in the know: With the equity markets having roughly tripled in less than 10 years, why are so many public pension funds still in trouble? If the reported numbers are correct (particularly your own state, Illinois, Ted), than imagine the trouble those pension funds would be in had not the equity markets recovered.
1. Actuaries didn't anticipate the longevity of the "boomers". 2. Perhaps many pension funds never really achieved their goal of 8-8.5% real return adjusted for inflation. 3. At least relative to employee union pension funds; many had/have "cost of living" adjustments built into forward pension payments; including pension benefits that continue to have a "health plan", too. 4. Under-funding of pension plans, over the years. This is a known condition for many pension funds.
I recall over the past several years reading about existing pension funds in Michigan municipalities, though still having contributions to the fund; finding that paying the retired employee pension/health care outflows was consuming 50% of the assets of the fund.
Example: Central States Pension Fund (Teamsters); of which, I read about several years ago. A story of, we may be able to maintain the monetary base of the fund; but ya'll will have to take a 30% decrease in your pension or the fund will crash and burn. Check some of the links in the search below, in particular to "UPS" drivers who were moved into the Central States Pension Plan. The link below is for numerous search items.....read for your choosing.
Side note: Although great to have a pension, the majority of pensions do not have a "cost of living" adjustment. If inflation was running at the "old" annual rate of 3%, or so; after 10 years folks would be loosing about 1/3 of their spending power from a pension, yes? I spoke with a few folks I know a number of years ago about this as a future planning tool relative to their spending habits going forward.
Well, this is my small take on such a big world.
The snowblower is lubricated, gas full and tested. Now waiting for April again in Michigan. Take care, Catch
Thanks @Ted. Interesting story. Reading over PRWCX’s most recent report (June ‘17 I think) Giroux commented that if rates rose much more he’d increase his high quality longer dated bond position - mostly out of concern over equity valuations. He went further in saying he felt bonds would prosper if equities fell off a cliff. Well - rates are up. We’ll see if he followed through. Somewhat unrelated to the CALPERS story - except that both point to a growing concern about valuations among money managers. Guess a lot of us are waiting for “the jello to hit the fan”.
Here’s where I’d appreciate more insight from those in the know: With the equity markets having roughly tripled in less than 10 years, why are so many public pension funds still in trouble? If the reported numbers are correct (particularly your own state, Illinois, Ted), than imagine the trouble those pension funds would be in had not the equity markets recovered.
They're in trouble because they promise too much money.
Comments
Here’s where I’d appreciate more insight from those in the know: With the equity markets having roughly tripled in less than 10 years, why are so many public pension funds still in trouble? If the reported numbers are correct (particularly your own state, Illinois, Ted), than imagine the trouble those pension funds would be in had not the equity markets recovered.
Bondland: Short duration yields/rates are higher, but.....
http://www.reuters.com/article/usa-bonds/treasuries-u-s-2-year-note-yield-hits-another-9-year-high-flattening-continues-idUSL1N1NK0ZW
Pension funds:
1. Actuaries didn't anticipate the longevity of the "boomers".
2. Perhaps many pension funds never really achieved their goal of 8-8.5% real return adjusted for inflation.
3. At least relative to employee union pension funds; many had/have "cost of living" adjustments built into forward pension payments; including pension benefits that continue to have a "health plan", too.
4. Under-funding of pension plans, over the years. This is a known condition for many pension funds.
I recall over the past several years reading about existing pension funds in Michigan municipalities, though still having contributions to the fund; finding that paying the retired employee pension/health care outflows was consuming 50% of the assets of the fund.
Example: Central States Pension Fund (Teamsters); of which, I read about several years ago. A story of, we may be able to maintain the monetary base of the fund; but ya'll will have to take a 30% decrease in your pension or the fund will crash and burn. Check some of the links in the search below, in particular to "UPS" drivers who were moved into the Central States Pension Plan. The link below is for numerous search items.....read for your choosing.
https://www.google.com/search?source=hp&ei=EBoLWrGHNJuzjwSX9LzgDw&q=central+states+pension+fund+news&oq=central+states+pension+fund&gs_l=psy-ab.1.1.0l10.1146.11288.0.13276.27.27.0.0.0.0.314.3286.1j25j0j1.27.0....0...1.1.64.psy-ab..0.27.3280...46j0i131k1j0i46k1j0i10k1.0.clw8X-GyJ9Q
Side note: Although great to have a pension, the majority of pensions do not have a "cost of living" adjustment. If inflation was running at the "old" annual rate of 3%, or so; after 10 years folks would be loosing about 1/3 of their spending power from a pension, yes? I spoke with a few folks I know a number of years ago about this as a future planning tool relative to their spending habits going forward.
Well, this is my small take on such a big world.
The snowblower is lubricated, gas full and tested. Now waiting for April again in Michigan.
Take care,
Catch