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Monday, September 08, 2008

I Threw It All Away

The meltdown of Fannie Mae and Freddie Mac have given me pause. I'm in the process of trying to determine how much exposure the PERS Fund has to these two dismal giants and how their government takeover will affect the value of the Fund. As soon as Treasury lets me know, you'll be the first to know it here. These two housing funds are so large that any meltdown there is likely to have some significant ramifications in the value of any fund that holds them in sizeable quantities. Should know soon and will post when I get the answer.

P.S. Ley Garnett responded with a very helpful, if concerning answer. The total amount of the PERS portfolio invested in Fannie/Freddie is about $2.7 billion, mostly all in fixed income portfolios. As of the close of business today, that represents about 4% of the fund. I guess the question of the day should be, should we be worried?

4 comments:

AlreadyRetired said...

As I undersand what has happened, which is yet to be totally formalized, it is the shareholders who have lost almost everything, not the bondholders. That is why the news media keeps stating that this may be a TAXPAYER bail out. I gathered that meant the bondholders will get paid at the expense of the taxpayers. So, if PERS holds bonds, not stock, I would assume they are less at risk. If not, what am I missing here?

Kurt said...

I also received a small raise this month. However, that's only two out of the five or six COLA's owed to me. Is the COLA calculated on your base retirement fiqure or is it a percentage of the previous years income? If it's based on the prior year, I would imagine we are being short changed due to the unpaid COLA's.

Kurt

mrfearless47 said...

kurt:

Unless you haven't been adjusted yet, you should have been paid all your COLAs. But your benefit was adjusted to what it should have been when PERS changed the 1999 earnings rate from 20% to 11.33%. The COLAs for 2003, 2004, 2005, and 2006 were applied serially to the revised base benefit. And, the COLAs for 2003 and 2004 were each less than 2%. HTH

mrfearless47 said...

alreadyretired:

I believe you are right about the stockholders, but PERS is also a stockholder as well as a bondholder. They had about 1% of the portfolio in stocks, so that means that bondholders will get theirs, but the stockholders will lose completely. PERS doesn't come out unscathed. And 1% of a $65 billion portfolio still isn't chump change.