US - The public pension fund industry has urged calm despite being in the middle of one of the worst economic downturns in history and facing mounting losses by the day.
Other large public institutions such as Minnesota Public Retirement System State Investment Board also announced losses of 13.1% in domestic equities from April of this year and 6.6% in international stocks.
However, Clark McKinley, a spokesperson for CalPERS, said the giant fund was well positioned to weather the financial storm: "CalPERS is dealing with the current financial turmoil as we have with other downturns in the past - counting on our diversified asset allocation and long term investment strategy to carry us through.
"Last December, the Board set new three-year asset allocation targets and ranges for our five asset classes which include reducing public stocks from 60% to 56%, increasing private equity and real estate and reducing fixed income."
He added the fund used a 15-year smoothing mechanism to even out member contribution rates, but admitted: "There may be a slight increase in employer contribution rates at the end of the current fiscal year."
Some public funds have also resorted to legal action, with the University of Washington suing Northern Trust for not pulling out of a securities lending programme last month, which resulted in losses of $7.5m, although at present this has not proven to be widespread.
States' options may be limited in the current economic turmoil, but as Rebecca Blank, a senior fellow at the Brookings Institute, said, some will have to increase the levels of contributions if the turmoil continues: "There maybe some scope for states to borrow to cover pensions activity in the circumstances if they push for Federal assistance or further stimulus packages."
Yet Alicia Munnell, director of the Center for Retirement Research at Boston College and a former member of the president's Council of Economic Advisers from 1995-97, said on a long term basis, the outlook was less dire than many had made out.
She concluded: "This is a once in a lifetime dramatic period of turmoil but there is no need to panic yet and pension funds are largely well funded and are long term in their vision.
"A year from now asset valuations should be higher [and] only if the situation is prolonged will we really have to worry. Many believe that public pension funds especially are in trouble but that is false. The public sector, where most of the largest pension funds reside, will not need cash flow for payments that may be called upon in the private sector."
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