Investments

Myths vs. Facts

Fact:
Our consultants affirmed the soundness of our risk position in June 2009, when the Board revised our asset allocations and risk management strategies. Our biggest on-paper losses, by far, were in public stocks that historically aren’t considered as risky as private equity and real estate, two asset classes that have out-performed stocks the past decade. In fact, the Board’s new asset allocations slightly lowered the risk of the overall portfolio. It raised the target for private equity from 10 to 14 percent of the portfolio, and reduced the proportion of stocks in the portfolio.

Fact:
We assume an average annual return on investment of 7.75 percent – the target that we need to hit to fully fund members’ pension benefits. Two of our leading consultants – Wilshire Consulting and Pension Consulting Alliance – reaffirmed our investment assumptions when they recommended adoption of our revised asset allocation in June.