LACERS Financial Report: Beyond the Ups and Downs: LACERS Pension Holds Steady


Michael Wilkinson, LACERS/Legal Representative

By Michael R. Wilkinson, LACERS/Legal Representative

Now, I know that my request is a big leap of faith, but you need to go with me on this one. I have been ruminating for more than a week on what I would write about, and I settled on my headline, Dow Up 500! Or Dow Down 500. Yesterday, the Dow was up 512. No, I can’t make this stuff up!

My point is, what do financial headlines mean to us as Retirees expecting our regular pension checks? The answer is that the daily ups and downs of the financial markets do not affect the long-term stability and safety of LACERS.

First, the daily financial news reporting focuses on big U.S. companies, like the Dow, which is made up of 30 of the largest U.S. firms. LACERS, however, has more than $17 billion invested in a wide variety of investments that include many types of investments that do not move up and down in sync with U.S. stock markets. For instance, bank loans or real estate might be going up while big U.S. companies are going down. This diversification is key to avoiding financial problems that come with “putting all your eggs in one basket.”

While the LACERS Board does not meddle with short-term changes in the markets, we do look at our long-term diversification of assets on a regular basis to determine which combination of investment classes provides the best return with a minimum amount of risk. The board makes changes in the overall asset allocation when needed.

So, how have we done? We recently received a performance report from our investment consultant for the period ending March 31 of this year. Here are the results for the yearly returns, gross of investment fees, for the longer time periods: 10 years, 10.65 percent, and 15 years, 7.07 percent. For 1 year, 3.33 percent; 3 years, 8.80 percent; and 5 years, 6.37 percent. These figures should all be considered against our actuarial assumption of a long-term return of 7.25 percent.

So, the next time Jim Cramer or someone on CNBC breathlessly announces that the NASDAQ or S&P 500 has a new low or high, you can rest easy that your retirement security is not in jeopardy because it is invested for the long haul.