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Teachers'
pension fund back on track Thanks
to the summer stock market rally, Pennsylvania's largest pension fund
profited from its investments during the last fiscal year for the first time
since 1999-2000. But
the fund, which supports 136,000 retired teachers, still fell short of its
performance target, according to information the fund released yesterday. The
$42 billion Pennsylvania Public School Employees' Retirement System (PSERS)
gained 2.7 percent on its investments during the 12 months ended June 30 as
rising stock values in the second quarter made up for losses that the fund
sustained during the second half of last year. The
recent bull market has lifted other pension plans as well. Indeed, the
nation's largest state investment fund, the California Public Employees'
Retirement System, did better than PSERS, reporting a gain of 3.9 percent
for the same period. As
stock prices remain depressed from the levels of the late 1990s, PSERS's
gains fell short of the fund's target of 8.5 percent annual returns, which
it has not met since it posted gains of 12 percent during the tech stock
bubble year ended June 30, 2000. The fund's investments lost money during
the bear-market fiscal years 2001 and 2002. Thanks
to pension increases enacted mostly under the administration of former Gov.
Tom Ridge, pension fund officials have warned that they will require
increased subsidies from state and local taxpayers to bail out the pension
system if investment returns do not improve sharply over the next few years. Still,
PSERS chairman Barbara Hafer, who is also Pennsylvania's elected state
treasurer, cited the gains as vindication for the fund's practice of hiring
hundreds of private money managers, at a cost of about $150 million a year,
to parcel investments across the stock, bond and alternative-investment
markets. Many of the fund managers are regular political contributors to
statewide candidates from both parties. Hafer
has defended the fund's performance in a legal and public relations battle
with critics such as Auditor General Robert P. Casey Jr., who wants to audit
the fund's money-manager hiring practices over Hafer's opposition. "We've
been through a tough bear market, during which the PSERS board and
professional staff have been criticized by people who apparently had
forgotten that the financial markets go down as well as up," Hafer said
in a statement released by PSERS. "These latest financial results show
our confidence is well-placed." PSERS
operating officials also claimed vindication yesterday. "During the
economic downturn of the last three years, PSERS has stayed the course and
remained committed to the strategic asset-allocation decisions made by the
board and our long-term investment strategy," PSERS chief investment
officer Alan Van Noord said. "I
am pleased with PSERS's investment results," added acting director
Jeffrey B. Clay, who credited Hafer, the rest of the fund's board and staff,
and PSERS's "long-term investment strategy" and
"prudent" investments. About
44 percent of PSERS's $42 billion in assets are in U.S. stocks, 18 percent
in foreign stocks, 21 percent in U.S. and foreign bonds, 9 percent in
venture capital and other private equity funds, 7 percent in real estate,
and the rest in cash. Copyright ©
2002 Global Action on Aging
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