ACCF Report: CalPERS and the Point of No Returns

WASHINGTON, Dec. 5, 2017 /PRNewswire-USNewswire/ -- A new report from the American Council for Capital Formation (ACCF) takes a closer look at the dire situation at the California Public Employees Retirement System (CalPERS), with unfunded liabilities growing from a surplus of $2.9 billion in 2007 to a deficit of more than $138 billion today, notwithstanding the record-breaking performance of the broader market. These figures reflect the pension fund's 2016-17 annual report, on which the fund has yet to make a public statement.

One key factor behind this consistently poor performance, according to the ACCF report, is the tendency on the part of CalPERS management to make investment decisions based on political, social and environmental causes rather than factors that boost returns and maximize fund performance.  The ACCF report finds that four of the nine worst performing funds in the CalPERS portfolio as of March 31, 2017 focused on supporting Environment, Social and Governance (ESG) ventures. None of the system's 25 top-performing funds was ESG-focused.

"CalPERS has demonstrated a troubling pattern of investments in social and political causes that are truly jeopardizing the retirement fund," said Tim Doyle, ACCF's vice president for policy and general counsel. "The problem is that millions of Americans depend on CalPERS and other large public pension funds to provide for a stable retirement. And if CalPERS isn't able to make good on those promises in the future, taxpayers will be held accountable for the losses."

The ACCF report also exposes the apparent political sway that CalPERS holds over other big money managers. This phenomenon was on display during the 2017 proxy season, when CalPERS was able to convince large institutional investors like BlackRock and Vanguard to back environmental-related shareholder proposals that it had championed, notwithstanding the potential of those proposals to have a damaging impact on the companies being targeted.

"Rather than focusing on getting the fund back on firm financial footing, CalPERS's management is making questionable investments of pensioners' money into social and political causes that are not yielding acceptable returns," said Doyle. "And even more troubling, because of how big the fund is and how much influence it wields, it's actually now forcing other large investors and proxy advisory firms with which it does business to follow suit."

Read more at www.ACCFcorpgov.org.

SOURCE American Council for Capital Formation