Administration August 10, 2011

CA Pension Funds Take Big Hit from Market Declines

August 10, 2011 (PLANSPONSOR.com) - The recent market declines have hit the nation's largest public pension fund, which lost about $18 billion off the value of its stock portfolio from July 1 until the August 9 market rebound.
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Officials of the California Public Employees’ Retirement System said they view the stock market turmoil as a chance to hunt for stocks at bargain prices and are maintaining a long-term investment view, according to the Associated Press.  

The AP reports that the California State Teachers’ Retirement System also sustained losses, but spokesman Ricardo Duran declined to say how large they were. The fund had moved some investments out of the stock market as a defensive move before the downturn, but is monitoring the situation and not making any aggressive moves to buy or sell stocks for now, he said.  

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In July, both CalPERS and CalSTRS reported investment gains of more than 20 percent for the fiscal year ended June 30, largely driven by stock values. CalPERS assets grew by $37 billion to $237.5 billion (see CalPERS Sees Best Performance in 14 Years); CalSTRS added $29 billion to reach $154.3 billion (see CalSTRS Posts Best Investment Return in 25 Years).  

The recent market drop has also dealt a severe blow to corporate pensions, according to data from Mercer (see Recent Market Drop Deals a Severe Blow to Pensions). 

Administration August 10, 2011

Alternative Products Still a Focus for Asset Managers

August 10, 2011 (PLANSPONSOR.com) - Cerulli's annual report on the retail alternatives space finds more than 70% of asset managers cite the desire to help investors boost risk-adjusted returns as the primary driver in offering these products.
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In addition to wanting to deliver better performance, firms also see alternatives as a means of differentiating themselves in a competitive marketplace. A press release said Cerulli sees asset managers’ emphasis on competitive differentiation as a shift in thinking. Firms may be less concerned about the impact of the market crisis and volatility, and are more concerned about their firm’s long-term business strategy.  

“The number of alternative mutual funds has tripled since 2003, with 65 new funds launched in 2010,” commented Pamela DeBolt, senior analyst and contributor to Cerulli’s annual retail alternatives research, in the announcement.  

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Alec Papazian, retail asset management analyst and co-contributor to the research, added: “Our research reveals that nearly 40% of asset managers view distribution one of the most significant challenges in offering alternatives. In order to access shelf space, product providers need to understand what gatekeepers are looking for in alternative investments. Aspects such as investment process, the firm’s and portfolio manager’s reputation and track record, use of derivatives, underlying benchmarks, and proper disclosures can be key criteria for some gatekeepers. It’s incumbent upon asset managers to learn which alternatives criteria are most important to their distribution partners.”

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