California Pension Fund Loses 25%
Not to pile on, but CalPERS is also down about 25% on the year due to 103% losses from real estate deals. At first I couldn’t believe what type of deals these pension funds and endowments were getting into (a Canadian pension fund was going to become majority owner in a telecom company…fortunately for them the deal fell through due to the credit crunch) but then I read that many pension and endowment funds needed 8% annual gains to meet their projections. No wonder they went after risky deals as that kind of return is hard to make consistently.
This is but one more area where projections based on “historical” returns only paid attention to that last 20 years instead of recognizing that they were an anomaly. When all is said and done, these plans have about half as much money as they need to survive over the next 20 years.
One Response to “California Pension Fund Loses 25%”
Mikkel — not to pile on, but the more-recent book by Roger Bootle, “Money for Nothing,” discusses many contemporary issues, which include the burst of the bubble and how it affects pensions, in addition to the necessity of avoiding constraints on trade, which is the key to future progress in the world. Also, the earlier book by him, “The Death of Inflation,” contains much that also is relevent today, which includes not the look-back period in terms of the bubble, but in terms of why for so long people seemed not to realize that the world has changed from its earlier decades of anomalous, substantial, and sometimes-unstable inflation.