Wednesday, July 27, 2011

Ouch! States Miss Pension Targets by 50% Even With Private Equity

Those good folks at Bloomberg report that in the last decade, as a wave of baby boomers began retiring, America’s biggest state pension systems earned less than half what they needed to keep up with promises made to millions of graying civil servants.
The state of Washington’s 3.92 percent return for the 10 years through June 30, 2010, after fees, was the best in a Bloomberg survey of state pensions with more than $20 billion in assets. That was nowhere close to the average yearly gains of as much as 8 percent that fund managers and public officials count on for meeting obligations to retirees.

“To assume that the median plan will reach 8 percent given this environment, that’s optimistic to say the least,” said Karl Mergenthaler, an executive director in JPMorgan Chase & Co. (JPM)’s securities services group in New York. “Public plans have an incentive to maintain their expected rate where it is. The risk is that they’ll overreach for returns.”

Find out more at http://www.bloomberg.com/news/2011-07-26/states-miss-pension-targets-by-50-with-private-equity-proving-not-enough.html

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