Local Politics

N.C. looking at riskier pension investments

Posted November 8, 2010

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— State Treasurer Janet Cowell said Monday that she plans to ask lawmakers for the authority to place a larger chunk of the state pension fund into higher-risk investments in hopes of generating higher returns.

Under state law, no more than 5 percent of the pension fund can be put into hedge funds and other alternative investments. Cowell wouldn't disclose how much higher she wants the cap.

The 2008 stock market collapse caused the pension fund to lose $17 billion, and despite profitability last year and so far this year, the fund hasn't met its targeted annual return rate of 7.25 percent when the past several years are considered, she said.

"As a whole, the public pensions are going through a time period when many of them are in trouble," she said. "With some base efforts in the General Assembly, we can keep intact, I think, a system that has served us well for 70 years."

In addition to seeking higher-return investments, Cowell said she wants lawmakers to pump more than $700 million into the pension system next year. She has criticized lawmakers in the past for not meeting their obligation to fund the system in years when returns topped the annual target.

This year, the state put $400 million into the system.

Money N.C. looking at riskier pension investments

The pension supports more than 820,000 retired state workers and teachers, and a citizens commission appointed by Cowell is expected to release recommendations next week on possible benefit changes for future retirees.

Ardis Watkins, legislative director of the State Employees Association of North Carolina, said investment decisions for the pension fund should be handled by a board of directors and not solely with the state treasurer.

"We need to see a lot better return of investment than we're getting," Watkins said. "(Higher-risk investments) maybe one of the best avenues to get to the point where you get more investment returns, but it's unsafe unless you have a governance change."

Cowell said the $70 billion pension fund can meet its current payouts, even with the economic downturn.

"We're still doing fine. We're still one of the strongest pensions in the country," she said.

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  • John Sawtooth Nov 9, 2010

    This is a successful and super-cautiously managed fund. Because it is so prudent with its investments, it does and can continue to operate successfully into the future.

    The reason these plans are not common any more is they have been raided by corporations and legislators. They have been recklessly managed. NONE OF THAT APPLIES HERE.

    She is asking to increase the percentage that can be used to offset risks borne by the conservative bulk of the investments. Currently its a low percentage - she's asking to increase that some and is being cautious about how much it should be.

    This is prudent and responsible trust management - that's why it looks impossible and strange. This is how it's supposed to work.

    It needs watching, and nned caution - but this is fine and the NC pension is not doomed or outmoded.

  • mountainlover Nov 9, 2010

    Cowell said the $70 Billion pension fund can meet its current payouts, even with the economic downturn.

    "We're still doing fine. We're still one of the strongest pensions in the country," she said.

    Something is wrong here.

    No, something is not wrong. It is Ms. Cowell's responsibility to forecast into the future and determine whether or not FUTURE pension obligations can be met. There are a lot of baby boomers who will retire in a few years. They were promised that if they worked a specified number of years that they would be compensated at a specified rate. It sounds to me as though Ms. Cowell believes that one's word should be honored. I agree with her.

  • mikeddurham Nov 9, 2010

    It is very important for us all to write in and stop this foolishness. Decisions like this will have a material impact on our future taxes. Complaining about it will not help.

    The truth is the hedge funds are way more sophisticated than the folks running state pensions. This is an age old tale that repeats over and over again. State pensions get duped by sophisticated wall street types and the local population gets to pay for it. Lets all write in to stop this stupidity.

    Mike

  • jet2rdu Nov 9, 2010

    Dem State Treasurer Janet Cowell wants to persue higher returns for the NC state pension plan by purchasing Hedge Funds. I always thought the Dems were against the partial privitazation of Social Security for younger workers because investing in the "Stock Market" was too risky.

    Also, Cowell said she wants lawmakers to pump more than $700 million into the pension system next year. She has criticized lawmakers in the past for not meeting their obligation to fund the system in years when returns topped the annual target. Does she know it was her Dem party that controlled the Legislature during the "budget boom" years and overspent?

    Someone ought to explain to the Treasurer that the NC budget will be in the hole for Billions over the next few years.

    Cowell said the $70 Billion pension fund can meet its current payouts, even with the economic downturn.

    "We're still doing fine. We're still one of the strongest pensions in the country," she said.

    Something is wrong here.

  • Karmageddon Nov 9, 2010

    This lady spoke at my daughters high school once and kept confusing Social Services with the Secret Service........and now she's in charge of state pensions......scary

  • raleigh-cary Nov 8, 2010

    7.25% is unrealistic in todays market. The only fix will be to pump more money into the pension fund or to reduce benefits. Defined benefit plans, such as the state plan, are not offered any longer in the vast majority of private enterprises. In the future, it will be impossible for the state to continue to pay out at current levels unless returns increase (unlikely) or money is found elsewhere (increase employee or employer contributions).

  • aspenstreet1717 Nov 8, 2010

    7.25% ? That's too ambitious right now.

  • suzakelly Nov 8, 2010

    There ya go. GAMBLE FASTER! DOUBLE DOWN! Don't ask your fellow state employees to contribute more, just gamble and lose more. Then ask the taxpayers to bail you out again and again. Keeping these same people in power, and making the same mistakes over and over is the definition of insanity.