Investing November 5, 2014

CalPERS Receives $249M from Bank of America Settlement

The California Public Employees’ Retirement System (CalPERS) has received $249.3 million in damages from Bank of America.
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Bank of America agreed in August to a settlement of Securities and Exchange Commission (SEC) claims related to its sales of mortgage-backed securities. At that time California Attorney General Kamala D. Harris announced California would recover $300 million in damages, which will reimburse CalPERS and the California State Teachers Retirement System (CalSTRS).

In September, CalPERS received more than $88 million as part of a global settlement reached by government officials with Citigroup over its mortgage-backed securities practices. CalPERS said in total it has recovered more than $500 million on losses the fund sustained from investments in mortgage-backed securities.

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“This is money that rightfully belongs to our members for their long-term retirement security,” says Anne Stausboll, Chief Executive Officer for CalPERS. “We’re glad that those who misled investors about the risks of mortgage-backed securities continue to compensate our members for their losses. We thank the California Attorney General’s Office and the U.S. Department of Justice for their diligent efforts.”

Administration November 5, 2014

U.S. Pensions' Funded Ratio Unchanged in October

The aggregate funded ratio of U.S. corporate pension plans was relatively unchanged in October.
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According to Wilshire Consulting, the aggregate funded ratio for U.S. corporate pension plans fell slightly to 85% for the month of October. The decrease in funding was the result of a greater increase in liability value versus a smaller increase in asset value.

“We estimate that overall, the asset value increased by 1.4% due to positive returns for most asset classes, while the liability value increased by 1.7% during the month due to falling corporate bond yields,” says Jeff Leonard, managing director, Wilshire Associates, and head of the Actuarial Services Group of Wilshire Consulting.

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“Year-to-date, the funded ratio for the sample plan has decreased by 4.8%, from 89.8% to 85%. This decrease was driven by the larger increase in liability value of 11.4% versus the 5.3% increase in asset value,” Leonard adds. The funded ratio in October 2013 was 91.2%.

The aggregate figures represent an estimate of the combined assets and liabilities of corporate pension plans sponsored by S&P 500 companies with a duration in-line with the Citi Group Pension Liability Index – Intermediate. The Funded Ratio is based on the CPLI – Intermediate liability, with service cost, benefit payments and contributions in-line with Wilshire’s 2014 corporate funding study. The most current month end liability growth is estimated using the Barclays Long Aa+ U.S. Corporate Index. The assumed asset allocation is 33% in U.S. equities, 22% non-U.S. equities, 17% core fixed income, 26% long-duration fixed income and 2% real estate.

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