CalPERS Calls The Top: Largest Public Pension Fund Mulls Dumping $50 Billion Of Stocks

Is the largest public pension fund in the United States getting ready to dump about $50 billion worth of stocks?  According to a new note from Bloomberg, CalPERS' board is meeting for a workshop today in Sacramento to discuss asset allocations for the upcoming year which could include a doubling of the fund's bond allocation from 19% to 44% which would be funded with a massive $50 billion sell down of equities.

Calpers is looking at a menu of options for its fixed-income target ranging from the current 19 percent to as much as 44 percent, according to a presentation for a board workshop in Sacramento coming up Monday. Equities could be cut to as little as 34 percent from 50 percent. Stocks were the best-performing asset class in fiscal 2017, returning almost 20 percent.

 

“The markets have had a pretty good run and it’s possible Calpers staff is thinking this might be a good time to lock in some of the gains,” Keith Brainard, research director for the National Association of State Retirement Administrators, said in a phone interview.

Pension

Unfortunately, as we've noted before (see: CalPERS Board Votes To Maintain Ponzi Scheme With Only 50bps Reduction Of Discount Rate), a shift toward higher fixed income allocations may require a simultaneous decrease in the fund's discount rate assumptions which could drastically increase contribution requirements from various public employers all around the Golden State.

“We’ve cut the return expectation to the point that employers are screaming, ‘We can’t afford it. We can’t afford it,’ ” Jelincic said. “I personally would be willing to take on a little more risk.”

 

The average allocation for public pensions is about 23 percent to fixed income and 49 percent to stocks, according to Nasra data.

 

The Calpers board is scheduled to vote on the allocation in December. Almost all of the fixed-income and stock holdings are managed in-house while more complex assets, such as private equity and real estate, are overseen by outside consultants. Allocations to private equity and real assets would stay at 8 percent and 13 percent, respectively, under all scenarios under consideration.

 

The allocation revisions occur every four years. Calpers is working to provide for a growing wave of longer-living retirees.

Of course, while a more conservative asset allocation may be warranted in the current bubbly equity environment, often logic is quickly dismissed by politicians when it's implementation could expose a massive ponzi scheme that has been hiding in plain sight for decades and risks the financial solvency of local and/or statewide government entities. 

This battle between math/logic and politicians has played out numerous times in states all across the country and somehow we suspect that "math/logic" will continue to lose...better to bury your head in the sand for a couple of more years and pretend there is no problem.

Comments

zorba THE GREEK Gap Admirer Mon, 11/13/2017 - 21:10 Permalink

What they should do is sell everything and buy gold and silver. That would cause the PMs to go up and bring more pension funds to buy PMs which would cause PMs to go up even more and attract more buyers. Kind of like Bitcoin...only gold and silver are real assets and are way undervalued so (unlike stocks and bonds which are both bubbles) they have plenty of room to run. But instead they will buy the debt of bankrupt entities at extremely low yields.                                               CrooksAssholesLowlifesPigsEgotistsRatsShills

In reply to by Gap Admirer

cherry picker Mon, 11/13/2017 - 18:57 Permalink

Bitcoin will go up to $100 K and it will take a week to post a transaction and if you want it faster, the fee will be 10% of the total transferred and hopefully it wont have crashed to $5K when it comes time to cash out those digits :)

adr Mon, 11/13/2017 - 18:57 Permalink

If it drives AMZN down to fantasy levels instead of galactic insanity, I'm all for it. AMZN at $80 sounds about right, that's what a more "normal" 35 P/E? 

Captain Mack Mon, 11/13/2017 - 19:01 Permalink

I live in NorCal and cant wait to watch Calpers collapse!! Every government drone libertard and various other corrupt agency bloated ticks are betting on this scam to payoff for them when they are done screwing everyone else in this state, in what they say is just doing their job.

steelhead23 Don Sunset Mon, 11/13/2017 - 19:40 Permalink

Thank you for pointing that out.  Pay attention folks, state employee pension funds have us all by the balls.  First, pols and city managers larded on future benefits (early retirement, high payout) to provide services today without ringing the tax bell now (Let the next fucker figure that out).  The funds were encouraged to use optimistic return rates to lessen the current burden on the state and municipalities.  And we all know that CalPers was scammed a while back.  Think you could just say fuck off to the retirees?  Think again.  Contract law is on their side.  Even if the pols suddenly get the message and cut servicess and salaries, these legacy obligations could bankrupt the cities.  Hence, if you live and pay taxes in Cali and you want CalPers to collapse, you are an idiot.

In reply to by Don Sunset

Blankenstein steelhead23 Tue, 11/14/2017 - 04:10 Permalink

No, the tax bell was already being rung.  To fully ring it and pay for everything would have required citizens paying 80% of their incomes in taxes.  Wouldn't have gone over to well now would it?The gooberment employees allowed their votes to be bought and the politicians didn't hold up their end of the bargain.  Too effing bad. Maybe they should't have been so greedy and put their failth in slimey politicians.  These entitled .gov assholes didn't care one iota about the taxpayers who have been paying big taxes all along.  And now they want the tax slaves to pay in moar and moar to make their golden pension whole, so they retire in style at the age of 55.  F that.

In reply to by steelhead23

Don Sunset Mon, 11/13/2017 - 19:04 Permalink

Mission accomplished (for this cycle?The 401k crowd, with their recurring bi-weekly buys of overpriced stocks, has extended the life of numerous pensions.  Pensions should get the hell out if they are still in the market.Now the FED drops the markets and pensions buy back in.  All the while, the 401k crowd continues with their buying of lower priced stocks up to the point they're way too high again.Repeat.  401k bagholders abound.The 401k crowd is getting suckered in this attempt to save the pension funds and others.Suckers!

BurningBetty Mon, 11/13/2017 - 19:17 Permalink

I am sure Black Rock aka The Fed & SNB will take them off Calpers hands with no downside to the market. It's the Monopoly way; The bank has unlimited funds!

mb Mon, 11/13/2017 - 19:31 Permalink

"the markets have had a pretty good run" yeah, 10 yrs Look at bond performance for last 10 yrs, and stock performancetruth is, calpers has lost their arse relative to everything else by only being 50% stocks Pension funds dont "lock in gains" Truth is, NO ONE knows the future except the Fed and Goldman Sachs . Any money manager....is really guessing...and gambling....with other peoples moneysome get lucky...some dont.My sibling was fired after losing millions for a pension fund.   Wasnt lucky. A buddy of mine that was a financial consultant ran out of room filling out his job once on a form we both filled out for background checks.He only had enoug boxes to write FINANCIAL CONI said"Sounds right to me"