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Pension funds, especially public pension funds, have been given unrealistic growth targets by employers that want to cheap out on contributions. The only way to
by bradleyjg 12y ago
Pension funds, especially public pension funds, have been given unrealistic growth targets by employers that want to cheap out on contributions. The only way to even have a chance to hit those growth targets is by taking on risk. So pension manager can't just stick to AAA rated bonds and blue chip stocks.
For example, CALPERS targets an overall 7.5% annualized rate of return in its investment portfolio.
- fredfoobar42 12y agoAlso worth noting CalPERS has been slashing its VC allocations.
- timr 12y agoFortunately (</sarcasm>) for CalPERS, this late-stage capital isn't considered VC! Many of these late-stage, insane-valuation rounds are euphemistically called "growth capital", and it's being driven by big banks and hedge funds, not VC firms. The Money always finds a way.
- dragonwriter 12y agoI'm not sure there is a good case to be made that the CalPERS target is an unrealistic long-term annualized rate of return target. IIRC, they have been making that much over most long and short term windows (they had a horrible -- -27% or something like it -- year in 2008 and so their performance over a 10-year window is still under 7.5%, in the neighborhood of 6.5% I think, but over both shorter and longer windows they are at or significantly above the 7.5% target.)