If autocracy is moving the world toward deglobalization, geopolitical investment principles should complement environmental, social and governance factors. There’s a lot for pension boards and investment managers to keep in mind.
A bill introduced by the state Senate would require CalPERS and CalSTRS to divest a combined $9.9 billion and prevent future investment in companies considered to have the greatest potential for future emissions.
To combat inflation, the central bank will be raising interest rates and shedding a big chunk of its $8 trillion bond portfolio. Its actions will ripple through the world of state and local finance.
Last year, pension plans enjoyed big returns in the market, bringing their balances back to levels not seen since the Great Recession. They are still $1 trillion short, however.
Barring unknowable virus mutation scenarios, state and local fiscal managers have the opportunity to navigate trends and crosscurrents already underway to make better decisions. One factor figures into almost everything: inflation.
Investment policy changes at CalPERS, the giant state retirement system, have lowered its earning target by two-tenths of a percentage point, leading to increased charges for local governments and their workers.
CalPERS has yet to recover the approximately $42 million in pension payments to 22,000 dead people, according to an internal audit. About 1,800 CalPERS recipients die each month, and the agency isn’t immediately notified.
The $95 billion pension has pushed back against an independent review that it has not been transparent when it comes to earnings and fees associated with alternative investments like hedge funds and equity firms.
The city wants to offer $100 million in pension obligation bonds, a move that both lowers pension debt and increases the funds’ earning power by providing more money to invest. But the sale is considered risky.
Much depends on their tax structures, particularly if Prop. 13-style tax caps are in place. But inflation-driven pressure for wage increases could squeeze budgets and crush pension funds.
State legislatures will have a lot on their plates. They’ll deal with issues in wildly differing ways. We set the context for the 2020 session with an overview of abortion, election security, housing, immigration, net neutrality, pensions, pre-emption, recession fears, redistricting, vaping, and workforce.
A recent Urban Institute analysis shows how many years new state workers will need to put in before earning pension benefits from their employers.