Rob Feckner: CalPERS is prepared for market's fluctuations
Sacramento, Calif. – Rob Feckner, president of the California Public Employees’ Retirement System (CalPERS) board of administration, penned an op-ed in today’s issue of The Sacramento Bee highlighting the importance of their long-term investment vision.
The op-ed comes after adverse news coverage of CalPERS’ decision to implement a new risk-reduction strategy. The plan, passed by a 4-3 vote, lowers the discount rate during strong years of investment returns. According to Feckner, this conservative approach will lower risk and volatility in the system. The goal is to ultimately reduce the rate from 7.5 percent to 6.5 percent over a 20-year period.
Critics of the strategy include Gov. Jerry Brown, who supported an alternate plan that would have accomplished the same goal in just five years. However, Feckner continues to support a plan that develops over time.
In a Youtube response to recent media coverage, Feckner emphasizes perspective in analyzing the Pension Fund’s 2015-16 fiscal year investment returns.
“As a system, we are keenly aware of the short-term volatility of a market,” Feckner said. “But intentionally, we avoid the knee-jerk reactions that could harm the system.”
Wylie Tollette, Chief Operating Investment Officer of CalPERS, reiterates Feckner’s statement and advises to stay focused on the long-term and not let a short-term vision “take us off our game.”
“Our goal is to protect the retirement of 1.8 million hard-working public servants in the state of California,” Feckner said.
More from The Sacramento Bee:
“We know that changing the discount rate affects the pension contributions of the state of California and local agencies that belong to CalPERS. But we designed the policy to minimize any increases and recognize the financial difficulties that many local governments are still facing.
The plan unfolds over time because we pay pensions over time – just like you do your mortgage. That’s why we don’t overreact when our investment returns soar to 18 percent, as they did just two years ago, or when they fall, as they did this year. We invest for decades, not one year, not even 10.
In addition to our policy, we also have a disciplined process to review the changing demographics of our members, the state of our economy and what we can expect from financial markets. We will conduct these reviews over the next year to determine if our discount rate should be changed sooner rather than later.
…Let’s put some perspective around public pensions and the importance of financial security for all. The choices CalPERS makes are never easy, but we make them with a long view. With so much at stake, we strive to keep our fund thriving for generations, to strengthen our commitment to our members and our communities and to deliver the pension benefits promised to public servants who work for all of us in California.”