LACERS BOARD UPDATE: LACERS Progressing On its Investment Goals


Michael Wilkinson, LACERS/Legal Representative

By Michael R. Wilkinson
LACERS/Legal Representative

LACERS is making good progress on its investment goals, according to a report from our investment consultant New England Pension Consulting. As regular readers of this column are aware, the job of funding our pension is a very long-term project, and we should not be alarmed when markets go down as long as our overall plan of investing in diverse asset classes produces the long-term returns we need to support the pension. Our pensions are funded from only three sources – the contributions that we pay as employee contributions while we are working, the City’s contributions, and investment returns.

The most recent report is for the period ending June 30. Although I generally like to use the returns that are net of the investment fees paid, this time I will use the gross of fees return so that we can compare with a larger set of comparable investment systems that are sized between $5 billion and $50 billion in assets. LACERS finished this quarter at $17.7 billion. Net investment returns would be slightly lower.

Here are the returns and the comparison to the similar sized plans by percentile rank, with 1 being best and 100 worst. 15 years: 7.32 percent, 17th percentile; 10 years, 9.90 percent, 15th percentile; 5 years, 6.30 percent, 34th percentile; 3 years 9.52 percent, 21st percentile; 1 year, 6.15 percent, 34th percentile. These returns should all be viewed in comparison to our long-term actuarial investment return assumption of 7.25 percent.

While we should be pleased with the returns LACERS has made recently, everyone should remember that investment returns are cyclical, and there will be times when the markets are turning down. However, LACERS has diversified investments so that the fund is well positioned to weather any financial storms. LACERS is careful to spread out its investments. LACERS does not make the emotional investment decisions that so many individual investors do and buy wildly after the markets have shot up in value and then dump them when the market are down.