Winning pension strategy
Dear Editor: Your April 7 Associated Press story on state pension investments was such an outrageous mix of factual errors, sensationalism and personal opinion that it’s hard to know where to start.
Let’s begin here: We don’t gamble. Calling our prudent, limited – and profitable – private equity and venture capital investments “gambling” is inflammatory and offensive. And to suggest that we are “doubling our bets” in a desperate effort to recoup losses is plain wrong.
At both the Pennsylvania Public School Employees’ Retirement System and the State Employees Retirement System, our investment procedures are the opposite of gambling. We invest only after exhaustive research by our staff and consultants.
The reporter chose to quote only “experts” who agreed with his opinion (one of whom tells us he was misquoted). The experts who advise us recommend investments in venture capital and private equity to diversify our portfolio, thereby reducing risk.
Other funds do the same. The article stated that Yale University is “cutting back” on those investments. It failed to report that Yale’s “cutback” is from a 25 percent of their portfolio to 20 percent – still far higher than either of our funds.
And it’s simply not true that we’re “doubling our bets” on alternative investments in hopes of recouping our losses (which the article overstated). If good opportunities arise, we may increase our venture capital investments (currently 3.3 percent of SERS’ portfolio and just 6/10th of 1 percent of PSERS). But offsetting the declines in our much larger stock portfolio will require a market recovery.
The fact is, the performance of SERS and PSERS is a success story. Both funds enjoyed great gains during the stock market boom and in the recent downturn declined by less than our benchmarks. Our losses for the last two years, combined, were smaller than our gains for any one of the preceding five years.
Both funds remain actuarially sound and fully funded thanks to the active management by the professionals whose fees the article criticized. Compared to New Jersey, which the article cited as a model, our funds performed as well or better over 10 years, and each significantly outperformed New Jersey in 2001.
By failing to put the losses in context and using sensationalistic words like “gambling,” the writer caused thousands of employees and retirees to fear that the pension funds are being mismanaged, when they are not, and smeared as common gamblers all of us who work so hard to ensure that PSERS and SERS operate at the highest levels of professionalism.
Barbara Hafer
Nicholas J. Maiale
Barbara Hafer is the state treasurer and chairwoman of the Pennsylvania Public School Employees’ Retirement System. Nicholas J. Maiale is chairman of the Pennsylvania State Employees’ Retirement System.