Pension Funds Continue to Mislead (Lie to) Their Beneficiaries

CALPERS, the largest public pension fund in the United States, servers as a proxy or leader of all public pension funds in the U.S. as far as policy and procedures are concerned.  They set the standard for all public pension funds.  Being the largest, they receive the most scrutiny.  It is seen that the Texas Municipal Retirement System generally follows the same path as CALPERS; the assumed high rate of investment return and diversification into high-risk asset classes for example.

Yves Smith at the nakedcapitalism blog chronicles the latest mischief.

CalPERS is also misleading beneficiaries and the public in communications that have much broader reach. In a Sacramento Bee op-ed, CalPERS board president Rob Feckner, in an op-ed that was almost certainly provided by CalPERS’ staff, tried to minimize CalPERS’ 0.6% return for fiscal year 2015-16 by contrasting it with the 18% return CalPERS achieved in fiscal year 2013-2014. Chief Operating Investment Officer made the same pitch in a short video on CalPERS’ website. But as the data cited by Varones showed, this result is not representative. If you look ever past measurement period that CalPERS has traditionally se, when the fundamentals were generally much more favorable than now, CalPERS hasn’t met its benchmarks. What basis does it possibly have for believing it will do better in the face of such big headwinds?

But instead of calling attention to the real problem, such as the destructive impact of central bank policies on savers of all sorts, as well as the damaging impact of bank-favoring post-crisis policies on growth, CalPERS is trying to snooker its beneficiaries on the fantasy that the old normal is coming back. 25 years of post-crisis malaise in Japan, near deflation in Europe, and nearly a decade-long weak recovery in the US, with no reason to expect better on any front, should disabuse them of that notion.

What CalPERS is so cavalierly tossing aside is its reputation for professionalism and accuracy. While its staff and board may reassure themselves that they are winning the image battle with their unsophisticated retirees, they are losing the war in the wider world, particularly with the media. . CalPERS needs to admit that it has serious fundamental problem with meeting its return targets. The longer it pretends otherwise, the greater the self-inflicted damage.