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Today’s Discussion Together
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Employer affordability Investment risk/liquidity Climate risk
Key Risks to the System Todays Discussion Together Investment - - PowerPoint PPT Presentation
Key Risks to the System Todays Discussion Together Investment - - PowerPoint PPT Presentation
Addressing Key Risks to the System Todays Discussion Together Investment Employer Climate risk risk/liquidity affordability 2 Investment Risk and Liquidity Where We Stand $395 2 $24.2 71% billion million billion Funded status
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Investment Risk and Liquidity
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Where We Stand
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$395 billion
Market value
$24.2 billion
Paid in benefits
71%
Funded status (estimate)
2 million
Members
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- Challenges over the next 10 years
- Declining interest rates, increasing profit margins less likely to repeat
- Current valuations are high
- Slower global economic growth
- Fewer opportunities to generate excess returns
- Underfunded status limits options
- Uncontrollable factors
- Unpredictability of current economic environment
Challenges
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7.5% 7%
Lower Discount Rate
Lowered the discount rate from 7.5% to 7% over three years (assumed rate of return)
30 yrs. 20 yrs. =
significant long-term savings
Shorter Amortization
Shortened the amortization period for employers to pay their unfunded liability
New Asset Allocation
Adopted new strategic asset allocation effective July 1, 2018
Capital Injection
Additional contribution to State and School pension obligations
$9 billion from the State $904 million to Schools
Strong Foundational Challenges
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Investment Focus: CalPERS Advantages
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Size Branding Liquidity
+
Long-Term Horizon Increased chance
- f success
=
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External Manager Analysis New Direction In-house Strategies
Philosophy of the Investment Strategy Review
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Innovative Private Equity Models
Private Equity
Co-Investments
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Employers’ Ability to Pay
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How CalPERS’ Retirement Benefits are Funded
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Public Agency Employer Contributions
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Our Board Monitors Employer Contribution Rate Impact
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Partnerships Funding Programs Pension Outlook Tool
We’re Working Toward the Same Goal
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Climate Risk
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How We Are Addressing Climate Risk
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Working With You
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Laser-focused on our top priorities
Benefits are only as secure as
- ur employers’ ability to pay them
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Thank you Questions?
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Appendix
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Fund Sustainability Health Care Affordability Reduce Complexity Risk Management Talent Management
Strategic Goals Focuses on Reducing Risk
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Strategic Goals
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Current Value $395 billion
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9.1% 5.8%
10-yr Annualized Return 20-yr Annualized Return
6.7%
2018/19 Portfolio Return
8.1%
30-yr Annualized Return
5.8%
5-yr Annualized Return
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71% 50-60% 70-80% 90-100%
Funded status goal:
100%
Estimate for 2019
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10-Year Projection
- f Funded Status
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