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Calstrs Portfolio Down About 33%

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From CalSTRS website: Even the mangers failed to see this coming.

 

CalSTRS has a $114 billion portfolio and is the second-largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California's 833,000 public school educators and their families from the state's 1,400 school districts, county offices of education and community college district.

 

Some statistics:

The high was 171 Billion as of June 30, 2007.

The high was 161 billion as of June 30, 2008. went down some

 

Currently, portfolio is 114 billion. NOW THATS WAY down. A loss of 33% from its June 30, 2007 high. Its better than 50% or more loss because they have about 40% bond allocation.

 

Calstrs is one of the few large pension plans does not use indexing instead it firmly believes in "Active Management". Sooner or later, they need to change to the 21st century. I am wondering, what happened to the active management to prevent these losses. If you do not jumb in and out of the market, and they shouldn't and I think they don't but why have active management? Its the active passive debate.

 

In answering my own question, I think that tout the active manage lingo to make people feel like they are "doing something." When in fact they behave more like a buy and hold passive strategy like one would use with index funds, not much turnover.

Just my 2 cents worth,

Steve

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From CalSTRS website: Even the mangers failed to see this coming.

 

CalSTRS has a $114 billion portfolio and is the second-largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California's 833,000 public school educators and their families from the state's 1,400 school districts, county offices of education and community college district.

 

Some statistics:

The high was 171 Billion as of June 30, 2007.

The high was 161 billion as of June 30, 2008. went down some

 

Currently, portfolio is 114 billion. NOW THATS WAY down. A loss of 33% from its June 30, 2007 high. Its better than 50% or more loss because they have about 40% bond allocation.

 

Calstrs is one of the few large pension plans does not use indexing instead it firmly believes in "Active Management". Sooner or later, they need to change to the 21st century. I am wondering, what happened to the active management to prevent these losses. If you do not jumb in and out of the market, and they shouldn't, then I ask again, why have active management, at least for their domestic portfolio?

 

In answering my own question is that I think that tout the active manage lingo to make people feel like they are "doing something." When in fact they behave more like a buy and hold with index funds, not too much turnover.

Just my 2 cents worth,

Steve

 

 

 

 

 

From CalSTRS website: Even the mangers failed to see this coming.

 

CalSTRS has a $114 billion portfolio and is the second-largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California's 833,000 public school educators and their families from the state's 1,400 school districts, county offices of education and community college district.

 

Some statistics:

The high was 171 Billion as of June 30, 2007.

The high was 161 billion as of June 30, 2008. went down some

 

Currently, portfolio is 114 billion. NOW THATS WAY down. A loss of 33% from its June 30, 2007 high. Its better than 50% or more loss because they have about 40% bond allocation.

 

Calstrs is one of the few large pension plans does not use indexing instead it firmly believes in "Active Management". Sooner or later, they need to change to the 21st century. I am wondering, what happened to the active management to prevent these losses. If you do not jumb in and out of the market, and they shouldn't, then I ask again, why have active management, at least for their domestic portfolio?

 

In answering my own question is that I think that tout the active manage lingo to make people feel like they are "doing something." When in fact they behave more like a buy and hold with index funds, not too much turnover.

Just my 2 cents worth,

Steve

 

 

 

 

Let me try this again.

 

Thanks Steve for posting this bad news. I am a teacher in CA and am convinced of the seemingly inevitable. STRS is going to have to start collecting more from those of us still working to be able to fund the retirements of the retired. I don't believe they will cut the benefits rather, in my opinion, they will very soon increase the % they take from current workers.

 

Any opinions on this or when it may occur and by how much? I think a 1-2 % increase within the next 24 months is what is coming.

 

Thanks,

Edy

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Hi edy,

I have no idea about CalSTRS raising working teachers’ contributions to offset the losses. There next meeting is April 1-2 and I will ask my friend who will be attending this meeting about your concern.

 

Below is some useful data about CalSTRS grew since 1985 with great charts. I only wish they could publicize this to all educators in California.

It is instructive for us because it shows how a portfolio properly allocated changes as the market changes and the importance for us to rebalance.

 

http://www.calstrs.com/publicdocs/Page/Com...1c-8149fdf30d55

 

Hope this helps,

Steve

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That was an interesting read.

 

According to the report, the long-term growth rate is above actuarial expectations, but the portfolio was underfunded at the start of the period (1985) and remains underfunded.

 

 

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Isn't it up to the state legislature, not CALSTRS, to determine what state employees contribute to the retirement plan?

 

 

 

I am not sure who makes the final decision to raise the amount. It was Governor Davis, the previous governor , who really sweetened the formula when the market was doing so well. Now that the market is down so much, I think it is a foregone conclusion that the rate will need be increased. Again, I strongly doubt the benefits of the current retirees will ever be decreased.

 

I would guess that some other states with pension type plans will need to do the same while the market is so low.

 

Edy

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Isn't it up to the state legislature, not CALSTRS, to determine what state employees contribute to the retirement plan?

§ 22901. Contributions to retirement fund

Each member of the Defined Benefit Program shall contribute to the retirement fund an amount equivalent to 8 percent of the member's creditable compensation.

Added by Stats 1993 ch 893 § 2 (AB 1796). Amended by Stats 1996 ch 634 § 155 (SB 2041); Stats 1997 ch

482 § 13 (SB 471); Stats 1998 ch 965 § 109 (AB 2765).

Amendments

1996 Amendment: Substituted "the plan" for "this system".

1997 Amendment: Added "creditable" after "member's"

1998 Amendment: Substituted "Defined Benefit Program" for "plan".

§ 22901.3. Normal rate of contribution for state employees

(a) Notwithstanding Section 22901, the normal rate of contribution for a "state employee," as defined in subdivision © of Section 3513 of the Government Code, who is a member of the Defined Benefit Program, may be established by a memorandum of understanding reached pursuant to Section 3517.5 of the Government Code. The memorandum of understanding shall be controlling without further legislative action, except that if the provisions of the memorandum of understanding require the expenditure of funds, the provisions may not become effective unless approved by the Legislature in the annual Budget Act.

(b) The Director of the Department of Personnel Administration may establish the normal rate of contribution for a state employee who is a member of the Defined Benefit Program who is excepted from the definition of "state employee" in subdivision © of Section 3513 of the Government Code, and an officer or employee of the executive branch of state government who is not a member of the civil service. The normal rate of contribution shall be the same for all members identified in this subdivision. The contribution rate shall be effective the beginning of the pay period indicated by the Director of the Department of Personnel Administration but shall be no earlier than the beginning of the pay period following the date the board receives notification.

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From CalSTRS website: Even the mangers failed to see this coming.

 

CalSTRS has a $114 billion portfolio and is the second-largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California's 833,000 public school educators and their families from the state's 1,400 school districts, county offices of education and community college district.

 

Some statistics:

The high was 171 Billion as of June 30, 2007.

The high was 161 billion as of June 30, 2008. went down some

 

Currently, portfolio is 114 billion. NOW THATS WAY down. A loss of 33% from its June 30, 2007 high. Its better than 50% or more loss because they have about 40% bond allocation.

 

Calstrs is one of the few large pension plans does not use indexing instead it firmly believes in "Active Management". Sooner or later, they need to change to the 21st century. I am wondering, what happened to the active management to prevent these losses. If you do not jumb in and out of the market, and they shouldn't and I think they don't but why have active management? Its the active passive debate.

 

In answering my own question, I think that tout the active manage lingo to make people feel like they are "doing something." When in fact they behave more like a buy and hold passive strategy like one would use with index funds, not much turnover.

Just my 2 cents worth,

Steve

 

Steve:

 

Every time I read one of your posts where you try to do math I am reminded of Yogi's famous quote about 90% of baseball being half mental which make more sense than your nonsensical comment about the 33% loss in the CalSTRS portfolio being greater than 50% because the fund has about 40% bond allocation.

 

You cant even answer your own question about CalSTRS investment policy correctly. Todays NY Times (B1) quoted Sherry Reeser, a spokewoman for CalSTRS who stated that the pension fund was interested in buying toxic bank assets that would be offered to private investors through a recently announced loan program guaranteed by the US Treasury. Said Ms Reeser: "Even though they are called toxic assets, some of them are not toxic and those are the ones that we are going to be ferreting out." Ms Reeser also stated that CalSTRS had alredy reduced its stock portfolio by 5% to free up money to purchase toxic bank assets. This doesn't sound like a passively managed fund, does it?

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From CalSTRS website: Even the mangers failed to see this coming.

 

CalSTRS has a $114 billion portfolio and is the second-largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California's 833,000 public school educators and their families from the state's 1,400 school districts, county offices of education and community college district.

 

Some statistics:

The high was 171 Billion as of June 30, 2007.

The high was 161 billion as of June 30, 2008. went down some

 

Currently, portfolio is 114 billion. NOW THATS WAY down. A loss of 33% from its June 30, 2007 high. Its better than 50% or more loss because they have about 40% bond allocation.

 

Calstrs is one of the few large pension plans does not use indexing instead it firmly believes in "Active Management". Sooner or later, they need to change to the 21st century. I am wondering, what happened to the active management to prevent these losses. If you do not jumb in and out of the market, and they shouldn't and I think they don't but why have active management? Its the active passive debate.

 

In answering my own question, I think that tout the active manage lingo to make people feel like they are "doing something." When in fact they behave more like a buy and hold passive strategy like one would use with index funds, not much turnover.

Just my 2 cents worth,

Steve

 

Steve:

 

Every time I read one of your posts where you try to do math I am reminded of Yogi's famous quote about 90% of baseball being half mental which make more sense than your nonsensical comment about the 33% loss in the CalSTRS portfolio being greater than 50% because the fund has about 40% bond allocation.

 

You cant even answer your own question about CalSTRS investment policy correctly. Todays NY Times (B1) quoted Sherry Reeser, a spokewoman for CalSTRS who stated that the pension fund was interested in buying toxic bank assets that would be offered to private investors through a recently announced loan program guaranteed by the US Treasury. Said Ms Reeser: "Even though they are called toxic assets, some of them are not toxic and those are the ones that we are going to be ferreting out." Ms Reeser also stated that CalSTRS had alredy reduced its stock portfolio by 5% to free up money to purchase toxic bank assets. This doesn't sound like a passively managed fund, does it?

 

Don't read my posts then.

Remember, its "just my 2 cents". Is my math clearer?

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Don't read my posts then.

Remember, its "just my 2 cents". Is my math clearer?

Hi Steve,

Wouldn't that 2 cents be worth more these days with past inflation? Maybe 2 and a half cents worth. Of course, our resident troll would probably find that incorrect too.

 

At any rate your post is worth something for me this morning. I alway like to find out where expressions come from so I looked this one up: http://en.wikipedia.org/wiki/My_two_cents_(idiom)

 

Best Wishes,

Joe

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Don't read my posts then.

Remember, its "just my 2 cents". Is my math clearer?

Hi Steve,

Wouldn't that 2 cents be worth more these days with past inflation? Maybe 2 and a half cents worth. Of course, our resident troll would probably find that incorrect too.

 

At any rate your post is worth something for me this morning. I alway like to find out where expressions come from so I looked this one up: http://en.wikipedia.org/wiki/My_two_cents_(idiom)

 

Best Wishes,

Joe

Hey Joe,

After all of these centuries of inflation, its worth hundreds or thousands now! Ops, there I go again.

Have a great day,

Steve

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