AFSCME District Council 36

Retiree Chapter 36

Article By: Fred Massey

State Treasurer John Chiang, who sponsored AB 2833, created this bill to establish greater transparency and accountability in public pension funds. This bill covers all public pension funds in California. This includes the University systems, CALPERS, CALSTRS, 1937 Act county pensions as well as independent public pensions. The assembly bill requires that all public pension funds publically disclose the various fees paid to private equity general partners, hedge fund general partners and other alternative investment partners on an annual basis. There are a lot of hidden fees in these investment vehicles, and incomplete disclosures in the alternative investment industry. They are also reluctant to reveal personnel changes. Chiang said “[the industry] robs us of the ability to determine the true risk and rewards of these investments.” The industry calls these shadow fees trade secrets.

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Article By: Fred Massey

LACERA’s Board of Investment had a busy March 6th meeting. The Board heard an economist discuss his expectations for inflation and interest rates, and Trump’s proposals for the economy. They endorsed Milliman’s recommended contribution rates for the coming fiscal year. Stepstone reviewed LACERA’s private equity portfolio and staffing pattern, and endorsed both. The staff attorney recommended that LACERA prepare a friend of the court’s brief supporting CALPERS appeal to the United States Supreme court. The Board agreed.

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Article By: Fred Massey

Good News. LACERA now has $59 billion in assets. The Interim CIO believes that the rate of return will improve in the coming years. The Board focused on reviewing three proposals for actuarial services. Stepstone, discussed repatriating investment money from China.

The LACERA Board of Investment has initiated the Request for Proposal (RFP) to contract with actuarial firms to provide actuarial consulting services and actuarial auditing services for the Board. The Board is prepared to sign a five- year contract for services with two one year extensions. The staff was hoping to get numerous candidates to offer their service but only three firms did. Milliman, Segal and Cavanaugh Macdonald did respond to the RFP. Each company has responded to the RFP and provided a detailed description of the services they are prepared to provide and the fees for service. These firms are offering to provide five years of service for about $2,500,000 for actuarial services and another $700,000 for the auditing services. When the BOI want a special report or ancillary services, these firms will charge $450 to $495 per hour for these services.

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Article By: Fred Massey

California’s Pension laws require public pensions to conduct valuation and experience studies at least every three years. LACERA has done a pension review every year and a full experience study every third year. Every year, Milliman, LACERA’s Actuary, comes to the Board of Investment and discusses the actuarial assumptions that guide the Board’s policy and actions. Last year Milliman came early beginning in October, returning in November and returning again in December. Every three years, the Board does a robust review to assess the reasonableness of the assumptions. The actuaries call this review an experience study. 2016 was the third year and the robust review was in order.

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