Salient to Investors:

  • Calpers’ exit from hedge fund investing underscored that there is no magic bullet to dealing with mounting pension fund costs. Chris Mier at Loop Capital Markets said the problem cannot be fixed very rapidly.
  • Wilshire Consulting said that in 2013, state pension plans had 75% of what they needed to cover retirement obligations. State and local governments put $95 billion into the 100 largest pension funds in 2013, up $23 billion from 2009.
  • Peter Hayes at BlackRock said those plans that take action will have a better rating profile, all things equal, and those that do not are going to be penalized with lower ratings and higher interest costs.
  • Riskier investments are luring pensions, which typically need to earn more than 7% annually to avoid falling behind.

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