LACERS BOARD UPDATE
By Michael R. Wilkinson, LACERS Commissioner
hile I regularly report on investment returns for LACERS, I always caution everyone not to be too tied up in the details of the ups and downs of market cycles. LACERS is a long-term investor, and the plan depends on those returns to fund our pension and health benefits regardless of short-term volatility.
That said, it is useful to look back at the LACERS performance for the period ending June 30, 2023, the most recent reporting period.
The total LACERS fund returned 6.77 percent for the year, 8.62 percent for 3 years, 6.54 percent for 5 years, 7.49 percent for 10 years and 7.57 percent for 20 years. For the multi-year returns, the figures are for the annual average return. All returns are net of investment fees. This compares favorably to our long-term investment return assumption of 7.0 percent per year.
LACERS invests in various asset classes to achieve good investment returns without taking on the risk of “having all of your eggs in one basket.” As I have discussed in previous columns, there is no one investment that provides high returns without market volatility. LACERS strives to find a diversified investment plan that uses several asset classes to minimize risk while maximizing returns.
Although it seems tempting to be able to “time the market” and buy and sell to capture market cycles, this is impossible to do, and LACERS avoids the practice. Instead, the plan uses a carefully crafted asset allocation strategy to buy different investments and maintain the allocations rather than playing the fool’s game of trading in an out of the market to get high returns.
In addition, LACERS uses low-cost passive investments, like index funds, when it is prudent to save significantly on investment fees and boost long-term returns. Where passive investments are not available or effective, such as with private equity, LACERS carefully chooses active managers to pick the best investments. Currently, 30 percent of all LACERS investments are passive