CalPERS has responded to the recent the Stanford Institute for Economic Policy and Research brief that concluded the fund, along with CalSTRS and the University of California Retirement System are collectively unfunded by about $500 billion dollars and have needlessly engaged in overly-risky investments.
A few points among the many CalPERS makes in this "CalPERS Responds" post:
• CalPERS does not believe that using a risk-free rate as suggested in the study is appropriate since the fund can earn a premium over the risk-free rate with high certainty by investing in a diversified portfolio with an acceptable level of risk.
• The study relies on data when the system had $45 billion less in assets than it has today. CalPERS assets are valued at $206 billion - a gain of more than $45 billion since the market downturn.
• (The Stanford study) ignores our diversified investment portfolio that has been time-tested during our 78 year history. If CalPERS had followed the recommended approach in the study, we would have given up billions of investment earnings, that have helped finance pensions rather than tax dollars.
• Funded status should not be viewed as a long-term irreversible trend. A pension fund's funded status - whether a liability or surplus - is constantly changing, depending on current economic circumstances. It is a snapshot in time that can change dramatically over a fairly short period of time due to the health of the overall economy.
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