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Financial performance, not politics, matters most to America's pension holders


Added 01-12-18 12:23:01am EST - “Public pension managers are increasingly using the funds entrusted to them for their own political agendas, with dangerous financial consequ...” - Washingtonexaminer.com

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Posted By TheNewsCommenter: From Washingtonexaminer.com: “Financial performance, not politics, matters most to America's pension holders”. Below is an excerpt from the article.

Every January, the New Year sees millions of Americans make a host of resolutions; to give something up, exercise more, and of course most common of all, be more financially responsible. We look at our bank account and non-pension investments knowing that the more we save today, the more comfortable we will be when we retire.

But new research suggests that the financial cushion we spend years building up, may not be what be enough. According to a study released last week by Spectrum Group, many pension members are unaware that a significant number of public funds are underperforming and underfunded, partly at least, because they are increasingly focusing on socially or politically motivated investment strategies.

Spectrum’s study examined public pension members’ awareness of two of the nation’s largest and most politically active funds – the California Public Employees’ Retirement System (CalPERS) and the New York City Employees’ Retirement System (NYCERS). Conducted last November, the survey revealed that 63 percent and 80 percent of members respectively, “believe their funds are fully funded, even though both funds are underfunded.” Perhaps that unawareness can be explained by the fact that some of the shortfalls are covered by taxpayers: Annual taxpayer contributions have risen from $7.2 billion to $12.3 billion over the past 10 years in California and from $1.4 billion to $9.3 billion in New York since 2002.

Unsurprisingly, the research showed that pension members were not happy about these deficits when this was explained. Nearly three-quarters of CalPERS and two-third of NYCERS respondents said that managers should focus on maximizing returns and ensuring funds were able to cover their liabilities. Nationwide, members believe managers should spend only 9 percent of their time using public resources to “advance worthy political and/or social causes” and instead devote two-thirds of their efforts to meeting financial performance targets.

Ultimately, members reiterated that they want the performance of their funds to be financially driven, strongly preferring to maintain personal control over any charitable donations or socially motivated investments. That focus on financial performance is the biggest and most important takeaway from the Spectrum research – pension members simply don’t see their funds as a political tool to advance social issues and causes.

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