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GERS Investments Slump But News Could Be Worse

March 13, 2009 — Government Employee Retirement System investments have taken a substantial hit due to the economic downturn, with equity stocks taking a big hit, bonds declining less, while the usually tepid investments in U.S. Treasury securities have performed well.
That was the summation given by Gino Reina of Segal Advisors on Friday after three days of briefings from GERS’ investment firms at the retirement system’s St. Croix offices. Segal Advisors is the firm hired to give independent investment advice to the GERS Board of Trustees. The board hears from all the investors twice a year.
During the three-day overview, small teams from each of the 17 separate investment companies managing GERS funds gave short PowerPoint presentations on the state of their GERS investments.
Overall, the GERS portfolio lost about 21 percent of its value as U.S. and international markets lost value over the past year, Reina reported, and the individual investment firms reported on where they were doing poorly and where they were doing better.
The GERS investments are highly diversified. Some of these companies specialize in domestic funds, others in international ones. Some only invest in very large concerns and funds and others only in "micro-cap" funds. Some avoid risk and others take a higher level of risk in hopes of making a higher rate of return. None of these strategies worked perfectly this past year, but GERS performed a little better than most stateside pension plans, which lost 26 percent on average (See: "GERS Payouts Far Outpace Contributions.")
Losses could have been more severe, Reina said.
"It is a diversified portfolio, which insulated it to some extent," he said Friday. "The bond portion helped us, remaining relatively strong compared to the equity side."
U.S. Treasury securities, usually the safe but low-returning portion of the portfolio, did well, with the secondary market for existing Treasury securities rising as investors seek a safe place to park their money, he said.
The softness in the market is a serious problem in the short run, but probably not so much in the long run, the GERS investment advisors said.
"The equity managers all shared a sense of optimism about the long term," Reina said. "But it's anticipated asset values will remain flat for some time and we don't know exactly when it is going to turn around."
The semi-annual investment report focused upon market losses which, while severe, can be turned around by a recovering economy. GERS faces a more serious, long-term deficit because it pays out more in benefits than it takes in from employees and employers in contributions.
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March 13, 2009 -- Government Employee Retirement System investments have taken a substantial hit due to the economic downturn, with equity stocks taking a big hit, bonds declining less, while the usually tepid investments in U.S. Treasury securities have performed well.
That was the summation given by Gino Reina of Segal Advisors on Friday after three days of briefings from GERS’ investment firms at the retirement system’s St. Croix offices. Segal Advisors is the firm hired to give independent investment advice to the GERS Board of Trustees. The board hears from all the investors twice a year.
During the three-day overview, small teams from each of the 17 separate investment companies managing GERS funds gave short PowerPoint presentations on the state of their GERS investments.
Overall, the GERS portfolio lost about 21 percent of its value as U.S. and international markets lost value over the past year, Reina reported, and the individual investment firms reported on where they were doing poorly and where they were doing better.
The GERS investments are highly diversified. Some of these companies specialize in domestic funds, others in international ones. Some only invest in very large concerns and funds and others only in "micro-cap" funds. Some avoid risk and others take a higher level of risk in hopes of making a higher rate of return. None of these strategies worked perfectly this past year, but GERS performed a little better than most stateside pension plans, which lost 26 percent on average (See: "GERS Payouts Far Outpace Contributions.")
Losses could have been more severe, Reina said.
"It is a diversified portfolio, which insulated it to some extent," he said Friday. "The bond portion helped us, remaining relatively strong compared to the equity side."
U.S. Treasury securities, usually the safe but low-returning portion of the portfolio, did well, with the secondary market for existing Treasury securities rising as investors seek a safe place to park their money, he said.
The softness in the market is a serious problem in the short run, but probably not so much in the long run, the GERS investment advisors said.
"The equity managers all shared a sense of optimism about the long term," Reina said. "But it's anticipated asset values will remain flat for some time and we don't know exactly when it is going to turn around."
The semi-annual investment report focused upon market losses which, while severe, can be turned around by a recovering economy. GERS faces a more serious, long-term deficit because it pays out more in benefits than it takes in from employees and employers in contributions.
Back Talk


Share your reaction to this news with other Source readers. Please include headline, your name and city and state/country or island where you reside.