Schwarzenegger to Borrow $2 Billion From CalPERS

(August 23, 2010) — Republican California Governor Arnold Schwarzenegger is seeking $2 billion from the $211.4 billion California Public Employees’ Retirement System (CalPERS) to credit the state.

To erase a $19 billion state budget deficit, the governor has proposed a reduction in public worker pensions to 1999 levels, refusing to sign any budget that doesn’t contain the cuts. Schwarzenegger would count the $2 billion as an advance on the roughly $74 billion he estimates in savings during the next three decades from his proposals to roll back pension benefits for government workers, Bloomberg reported. The advance would come from pension cuts projected to save $93 billion over 30 years.

Still, Republicans and Democrats lack a solution over whether to use higher taxes or spending reductions to lower the state’s deficit. With California still lacking an accepted budget, negotiators are considering alternatives to generate savings, such as borrowing or deferring payments, The Sacramento Bee reported.

The state is required to pay $3.9 billion this fiscal year to CalPERS in order to finance retiree costs, up from $145 million a decade earlier.

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To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Caisse says it was able to beat the average loss of Canadian pensions for the first half of 2010 by focusing on fixed income and alternative assets, while reducing holdings of stocks.

(August 20, 2010) — Boosted by investments in private equity and infrastructure, Canada’s biggest pension-fund manager, the Caisse de Depot et Placement du Quebec, posted a return of 2.3% in the first half of this year.

The fund stated that the driving factors behind the $4.1 billion in value added included the 14.7% return of its private equity portfolio, 6.0% return of the Caisse’s fixed income portfolios, mostly from corporate and real estate debt investments, 10.1% return of its infrastructure portfolio, and a proactive underweight in equity portfolios. A July report by RBC Dexias investment-services unit shows that the Montreal-based fund manager’s results outpaced the 1.4% average loss of Canadian pensions for the first half of 2010.

The large pension fund manger said it doesn’t expect the volatility of May and June to subside quickly because of continued worries about the strength of the recovery in Europe and the US and a potential slowdown in China. “The markets were challenging and volatile in the first half of the year, with sharp declines in global stock market indicators and significant concerns about European and US economic outlooks,” said Caisse President and Chief Executive Officer Michael Sabia in a statement. “Despite this fact, the Caisse navigated this unfavorable environment well. Our results reflect the work of our asset managers during this period. We find it particularly encouraging that we could produce $4.1 billion in value added compared with the markets,” he added.

As of June 30, Caisse’s net assets under management rose 3.2% to $130.7 billion from $125.5 billion at the end of 2009.

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To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742