LACERS BOARD UPDATE
By Michael R. Wilkinson, LACERS Commissioner
Email: MikeWilkinson4LACERS@gmail.com
I
t is now time again to look at LACERS’ financial performance for the third quarter of the year, which ended Sept. 30, 2024. I am pleased to report that the performance results are strongly measured against our benchmarks and against other similarly sized funds.
The reports were prepared by NEPC, LACERS’ investment consultant. For the third quarter (ending September 2024), LACERS returned 5.55 percent net of fees for three months; 9.79 percent for the year-to-date; 17.39 percent for 1 year; 3.94 percent for 3 years; 8.15 percent for 5 years; 7.32 percent for 10 years; 7.40 percent for 20 years; and 7.02 percent since inception (July 2001).
For perspective, it is good to look at what our goal is for our investment program. We aim to earn our assumed rate of investment return of seven percent over the long term. The return for all the time periods of at least a year exceeded seven percent except for three years. As they say, “Your mileage may vary,” and not every year will be a winner, but our system is designed to perform for the long term. So do not expect positive returns for every period. Preliminary reports for the period ending Dec. 31, 2024, are lower, but they are not finalized.
Two ways to measure our investment performance are to compare our returns to a benchmark (a comparison to what an index fund would return) and to compare it to a similar-sized fund. LACERS’ results beat the benchmark for all the time periods listed above except for year-to-date.
Compared to other public plans of $5 billion to $50 billion in assets, LACERS performed better than or equal to the median fund for most time periods in gross of fees returns. Here are the relative returns with the lowest percentiles being best. A first percentile means the plan outperformed 99 percent of other funds. LACERS relative returns with the percentile in parenthesis are: three months (10), year-to-date (33), one year (36), two years (33), three years (68), five years (50), seven years (49) and 10 years (42).
Finally, NEPC reported on risk adjusted returns, and the report was mixed. For some time periods, on some measures of risk, LACERS underperformed peers but for other time periods and a different peer group, LACERS outperformed.
As you know, I am a die-hard advocate of passive investments (index funds) to control risk and keep fees down. This doesn’t work for every asset class, but LACERS is strongly committed to passive investing as shown by the most recent NEPC report on the percentage of LACERS’ passive investment: total fund, 31 percent; U.S. equity (stocks): 80 percent; Non-U.S. Equity, 44 percent and Core Fixed Income, 22 percent.
