Tuesday, September 30, 2008

Slow Down Fast

PERS has released its latest "PERS By The Numbers (September 2008)". You can download a copy here. If you study it closely, you can see some evidence of the recent downturns in the stock market. PERS assures members and retirees in a note today that it has a handle on the current situation even though it is a difficult time.

As I've noted before, PERS has been salting away reserves since 2003 and was about 112% funded at the end of last year. Of course, the current downturn (uptick?) on the stock market, the collapse of the subprime mortgage market, the scandals involving credit swap derivatives, etc, will almost assuredly have a negative effect on the PERS Fund. This has led to some testy debate between the two candidates running for the State Treasurer's office. I haven't decided who to support, although the more I hear from each candidate, the less impressed I am with them. They both know that the PERS Fund is the largest chunk of cash the state manages. And the State Treasurer is responsible for managing those funds. You get your choice between Ben Westlund, a Republican in 2003, an independent in 2005, and a Democrat now, and Allen Alley, a Republican to the core, who worked as an economic adviser to Ted Kulongoski during his first term. Kulongoski has endorsed Westlund. This *should* be a difficult choice for PERS members/retirees. I encourage you all to study their positions carefully and take the opportunity to ask them questions if you meet them. It may help you decide.

2 comments:

It's me said...

Cripes. I thought I had enough to worry about figuring out city council and state reps.

If you find any good sources for what they REALLY believe, please post them so we can follow up.

Thanks for what you do.

Krassen Dimitrov said...

PERS needs to return 8% per annum to meet its obligations.This is hard to do it when they put their money into perennial losers, such as OVP Venture Partners. Here's OVP's record for the past decade:

OVP V has lost 20% per year for 11 years
OVP VI has lost 10% per year for seven years
OVP VII has lost 25% per year for two years

These are all negative returns. How do you go to +8% per annum with such drags?

In early 2006 OVP went to the Oregon Investment Council, who oversees the PERS money, and asked for $40mil for their next fund, despite their abysmal performance. Do you know how much they got? $50-freaking millions! These firms get ~2% in annual fees, not tied to performance. So Oregon will be paying these perennial losers $1mil a year for 10 years from these $50mil. That's ~$10mil of public pension funds going directly to this bunch, regardless of how badly they screw up the other $40M(and they have been consistently bad)

And here's an interesting tidbit: before making their pitch, OVP had invested in the company of one of the OIC members, his name is Mark Gardiner. You think that didn't "grease the wheels"?

The new Treasurer will have his hands full if he is to clean up this mess...