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Posted August 16, 2007 The full Governing Management Letter | Subscribe to The Governing Management Letter Bonus columns: GIRARD MILLER’S BENEFITS BEAT CIOs Tell It Like It Is Warning trustees that trees don't grow to the moon Questions, success stories or anecdotes about benefit issues in government? As the stock market continued setting new records in July, just weeks before Wall Street's recent anxiety attack over subprime loans and risky businesses, the chief investment officer of one of the country's largest public pension plans advised his trustees that future returns will be more difficult to achieve. 
Such candor is rare in the world of public pension plans. In the past, the trustees and their advisers have extrapolated the highest recent returns into the future indefinitely, and then given away unsustainable benefits using these flimsy projections. Often, their advisers were accomplices in the act, by feeding unrealistic reports to support the trustees' conclusions — all in the name of job security. In my June column on pension overfunding, I noted that times like this are when trustees and pension fund managers need to work even harder to keep the fund-raiders' hands out of the cookie jar. In a related story, the Colorado pension fund's CIO has "dialed down" her fund's investment risk this year. The fund is still positioned for growth, but they've learned important lessons from the 1990s bubble market. So it's truly encouraging to see two of the nation's top professionals put their mouth where their money is, and their money where their mouth is, respectively. They have injected a sober realism into their funds' plans for the future. Hats off to Chris Ailman and Jennifer Paquette: Pension man and woman of the month. Last month: Girard Miller, an analyst of benefits and investments with 30 years of experience in the public, private and nonprofit sectors, can be reached at Girardinmalibu@charter.net. © 2007, Congressional Quarterly, Inc. Reproduction in any form without the written permission of the publisher is prohibited. Governing, City & State and Governing.com are registered trademarks of Congressional Quarterly, Inc. |
