CalPERS org.docx

CalPERS org.docx

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CalPERSorg

Project:

PensionFund

CaliforniaPublicEmployees’RetirementSystem

AComponentUnitoftheStateofCalifornia

GroupMembers:

ChangLiu

ChenchenGou

DiyaLei

Hsin-JungLi

JiaWang

LuZheng

MengZhang

TableofContents

Ⅰ.DescriptionofCalPERS3

Introduction3

Mission&StrategicPlan4

LiabilitiesforCalPERS5

Ⅱ.DetailsofAssetAllocation7

Ⅲ.TheAnalysisofUSandGlobalMacroEconomy9

1.US–GDP9

2.US–CPI9

3.US–FederalFundsRate9

4.US–ExchangeRate9

5.US–UnemploymentRate10

6.GlobalOverview10

TotalForecastinGlobalEconomy11

Ⅳ.TheAnalysisofEachClassofAsset12

1.GlobalDebtSecurities12

2.InternationalEquities13

3.DomesticEquities13

4.CashEquivalentandShort-termInvestments14

5.AlternativeInvestment15

6.RealEstate15

7.Inflation-linkedBond16

Ⅴ.AssetsReallocation17

Ⅵ.Conclusion&Recommendation21

Ⅰ.DescriptionofCalPERS

Introduction

CaliforniaPublicEmployeesretirementsystem,CalPERS）istheworldforthbiggestpensionfund.HeadquarteredinSacramento,CalPERSprovidesretirementandhealthbenefitstomorethan1.6millionpublicemployees,retireesandtheirfamiliesandmorethan3,000employers.Establishedin1931,thesystembecameoperationalin1932forthepurposeofprovidingasecureretirementtostateemployees.CalPERSbeganadministratinghealthbenefitsforthestateemployeesin1962,andfiveyearslater,publicagenciesjoinedthehealthprogramonthecontractbasis.Applyingforthedefinedbenefitretirementplan,CalPERSprovidesbenefitsbasedonamember’syearsofservice,age,andhighestcompensation.Associatedwiththeexcellentperformanceforthepastyears,CalPERSnowisstilltheleadingpensionfundacrossthenation.

UniqueCharacteristic

Otherthanthetraditionalbenefitsthatprovidesbyordinarilypensionfund,CalPERSprovidesfordisabilityanddeath.Inaddition,CalPERSoffersadditionalprograms,includinglong-termcareinsurance,amemberhomeloanprogram,adeferredcompensationretirementsavingplan,andmembereducationservices.

CalPERShasfivecorevalueswhichmakeitcompetitive.Quality:

strivetomeetinternalandexternalcustomer’sneedsthroughinnovation,competence,andteamwork.Respect:

sensitivetotheneedsofothers,bothinsideandoutsidetheorganization.Integrity:

inallcircumstance,actinanethical,honestandprofessionalmanner.Openness:

open-mindedandwillingtoshareinformationwithothers.Accountability:

takeownershipandresponsibilityforactionsandtheirresults.

Inaddition,duetothecurrentMacroeconomicandtheexpectedreturnforprivateequity,CalPERSdecidetoinvestmentmoreintoalternativeinvestment.ThischangeiscontradictedwithtraditionalpensionfundideabecauseAIMistoorisky.However,thisremarkablechangehasbenefitedCalPERS.

DetailedDescription

InthebigpictureCalPERScontainssixdifferentbenefitclasses.Andsomeclassesalsoincludesdifferentsortofprograms.

◆RetirementBenefits

⏹Judges'RetirementSystemRetirementBenefits

Benefitsthatarecalculatedusingadefinedformula.Theretirementbenefitsarebasedonapercentageofcurrentsalaryofthelastjudicialofficeheld.

⏹Judges'RetirementSystemIIRetirementBenefits

Providesalifetimemonthlybenefitofupto75%offinalannualsalary

Amonetarycreditplanallowsforarefundofmembercontributions

⏹Legislators‘RetirementSystemRetirementBenefits

Threeseparateformulastodeterminetheretirementbenefitamount.

⏹VolunteerFirefighters'AwardSystem

◆Disability&IndustrialDisabilityRetirement

⏹Disabilityretirement

Thecauseofdisabilityneedtoberelatedtoemployment

⏹Industrialdisabilityretirement

Disabilityisduetoajob-relatedinjuryorillness

◆DeathBenefits

CalPERSprovidesbenefitstothebeneficiariesorsurvivorsofactiveandretiredmembersupontheirdeath.Benefitsandeligiblerecipientsvarybasedonwhetherthememberwasstillworkingatthetimeofdeathorwasretired.

◆HealthBenefits

⏹PreferredProviderOrganizations（PPOs）

⏹HealthMaintenanceOrganizations（HMOs）

⏹ExclusiveProviderOrganizations（EPOs）

◆Long-TermCareBenefits

CalPERSoffersthreeplanoptions,“comprehensive”“facilitiesonly”“partnership”.

◆MemberHomeLoanprogram

Programoffersmemberssecurity,protection,andchoicewhenpurchasingorrefinancingahome.

Mission&StrategicPlan

CalPERShasamissionwhichistoadvancethefinancialandhealthsecurityforallofmembers.Thecompanywillfulfillthisobligationbycontinuallymaintaininganenvironmentthatproducesresponsivenesstoallparticipates.

ThestrategicplanisthewaytomatchAssetsandLiabilitiesformorethan1.6millionmembersandparticipatingemployers.CalPERS’sbusinessphilosophyiscustomer-oriented.TherearefourcorevalueTherearefoursub-strategicplansthatneedtobeexplainedinordertoimplementtheoverallstrategicplan.

◆ENTERPRISE

Buildaworkenvironmentthatvaluesquality,respect,diversity,integrity,openness,communication,andaccountabilitytoensurethesustainabilityofCalPERSpensionandHealthbenefitsystems.

Sustainahighperformanceworkculturethatutilizingstaffdevelopment,technology,andinnovativeleadershipandmanagementstrategies.

◆PENSION

⏹Providesustainablepensionbenefitproductsandservices.

⏹Administerpensionbenefitservicesinacustomerorientedandcosteffectivemanner.

⏹Educatememberstomakeinformeddecisionsleadingtoapredictableretirementfuture.

◆ASSETANDLIABILITYMANAGEMENT

⏹Managetheriskandvolatilityofassetsandliabilitiestoensuresufficientfundsareavailabletopaybenefitsandtominimizeandstabilizecontributionsinthelong-termperspective.

◆HEALTH

⏹Developandadministerquality,sustainablehealthbenefitprogramsthatareresponsivetoandvaluedbyenrolleesandemployers.

⏹Promotetheabilityofmembersandemployerstomakeinformeddecisionsresultinginimprovedlifestylechoicesandhealthoutcomes.

Performance

Althoughthecompanytriestosustainahigh-performance,thefinancialcrisishasbroughtnegativeeffortstothecompany.Thecompany’sprofitabilityhasbeenhurtbadly.

LiabilitiesforCalPERS

Calpers’liabilityhasbeenseparatedintofourpartofretirementsystem,PublicEmployees’RetirementSystem,Legislator’sRetirementSystem,Judges’RetirementSystemandJudges’retirementSystemII.TheabovegraphistheillustrationforPublicEmployeesRetirementSystem.

Benefitsarepaidaccordingtothecategoryofemploymentandthetypesofbenefitsconvergeprovidedbyemployers.Therearefourcategoriesofmembership.Miscellaneousmembers:

staff,operationalandallothereligibleemployees.Safetymembers:

Patrolofficers,policeofficersandotheremployeeswhosedutiesareinactivelawenforcement.StateIndustrialMembers:

employeesofthedepartmentofCorrectionandtheCaliforniaYouthAuthority.StatePeaceOfficersMembers:

EmployeespositionedintheGovernmentCodeorbythedepartmentofPersonalAdministration.

DefinedBenefitPlanFormula

CalPERSappliesthedefinedbenefitretirementplan,andtheirPBOiscalculatedbasedontheassumptionofretirementage,salaryatretirement,salarygrowthrate,multiplier,andthediscountrate.CalPERSestimatesthattheemployeewillretireattheageof63,andtheirexpectedlifeexpectancyis75.Thesalaryatretirementistheaveragesalaryofthelastthreeyears,andweestimatethefinalsalarywillincrease2%inordertocompensateforinflation.Thediscountrateweuseisthe5yearaveragereturnonassets.ThePBOortheliabilitiesisthepresentvalueofthetotalfuturesalary.

Ⅱ.DetailsofAssetAllocation

BasedontheinformationreleasedbyCalpers’scomprehensiveannualreport,thecurrentassetallocationisthefollowing:

●Inflation-LinkedAsset

TheInflation-LinkedAssetClasscompromisefourmajorprograms:

Commodities,Inflation-LinkedBonds,Infrastructure,andForestland.TheCommoditiesProgramisbenchmarkedtothe GoldmanSachsCommodityIndex,andhasexposureincommoditiesfuturesorcomparablebilateralcontracts.Commoditiesexposuresarecollateralizedwithaninvestmentofequalvalueincashorhigh-qualitybonds.TheinflationlinkedbondprograminvestsininflationlinkedbondsofUK,France,Japan,andItaly.TheInfrastructureProgrammayinvestintransportation,energy,naturalresources,water,communications,andrelatedprojects.TheForestlandProgrammayinvestintimberlandandotherrenewableresourcesincludingbio-fuels,pulpwood,andspecialtyhardwood.

●CashEquivalent

CalPERS’scashequivalentinvestmentsincludedomestic,internationalcashequivalents,andinternationalcurrencyinvestment.DomesticcashequivalentsareUStreasurybills,whichhasatotalmarketvaluearound12billion,accountingforalmost100%ofthecashequivalents.TheinternationalcashequivalentisARScashreserve,andCalPERSmainlyinvestinJapaneseYen,SouthAfricaRand,andEuroforforeigncurrencyinvestment.

●GlobalFixedIncome

Fixedincomeisanotherbigpartofthetotalfunds,ittakesupalmost30percentofthetotalinvestment,includingdomestic,andinternationaldebtsecurities.Domesticfixedincomesecuritiesaremanagedinternally.Theseinvestmentsincludepublic,privatecorporate,governmentagencies,convertible,assetbackedandmortgage-backedsecurities.Amongtheseinvestments,UStreasuryisthedominantgovernmentbondstheyhold.Forthecorporatebonds,theyaremainlyholdinglargemultinationalcompanies,suchasJPMorganchase,AIG,bankofAmerica,GoldmanSachsgroup,andcitibankcreditcardissuancetrustetc.forassetormortga