CalPERS org.docx

1、CalPERS orgProject: Pension Fund California Public Employees Retirement SystemA Component Unit of the State of CaliforniaGroup Members:Chang LiuChenchen GouDiya LeiHsin-Jung LiJia WangLu ZhengMeng ZhangTable of Contents.Description of CalPERS 3Introduction 3Mission & Strategic Plan 4Liabilities for

2、CalPERS 5.Details of Asset Allocation 7.The Analysis of US and Global Macro Economy 91. US GDP 92. US CPI 93. US Federal Funds Rate 94. US Exchange Rate 95. US Unemployment Rate 106. Global Overview 10Total Forecast in Global Economy 11.The Analysis of Each Class of Asset 121. Global Debt Securities

3、 122. International Equities 133. Domestic Equities 134. Cash Equivalent and Short-term Investments 145. Alternative Investment 156. Real Estate 157. Inflation-linked Bond 16.Assets Reallocation 17.Conclusion & Recommendation 21.Description of CalPERSIntroductionCalifornia Public Employees retiremen

4、t system, CalPERS) is the world forth biggest pension fund. Headquartered in Sacramento, CalPERS provides retirement and health benefits to more than 1.6 million public employees, retirees and their families and more than 3,000 employers. Established in 1931, the system became operational in 1932 fo

5、r the purpose of providing a secure retirement to state employees. CalPERS began administrating health benefits for the state employees in 1962, and five years later, public agencies joined the health program on the contract basis. Applying for the defined benefit retirement plan, CalPERS provides b

6、enefits based on a members years of service, age, and highest compensation. Associated with the excellent performance for the past years, CalPERS now is still the leading pension fund across the nation. Unique Characteristic Other than the traditional benefits that provides by ordinarily pension fun

7、d, CalPERS provides for disability and death. In addition, CalPERS offers additional programs, including long-term care insurance, a member home loan program, a deferred compensation retirement saving plan, and member education services. CalPERS has five core values which make it competitive. Qualit

8、y: strive to meet internal and external customers needs through innovation, competence, and teamwork. Respect: sensitive to the needs of others, both inside and outside the organization. Integrity: in all circumstance, act in an ethical, honest and professional manner. Openness: open-minded and will

9、ing to share information with others. Accountability: take ownership and responsibility for actions and their results. In addition, due to the current Macroeconomic and the expected return for private equity, CalPERS decide to investment more into alternative investment. This change is contradicted

10、with traditional pension fund idea because AIM is too risky. However, this remarkable change has benefited CalPERS. Detailed Description In the big picture CalPERS contains six different benefit classes. And some classes also includes different sort of programs. Retirement Benefits Judges Retirement

11、 System Retirement Benefits Benefits that are calculated using a defined formula. The retirement benefits are based on a percentage of current salary of the last judicial office held. Judges Retirement System II Retirement BenefitsProvides a lifetime monthly benefit of up to 75% of final annual sala

12、ryA monetary credit plan allows for a refund of member contributions Legislators Retirement System Retirement BenefitsThree separate formulas to determine the retirement benefit amount. Volunteer Firefighters Award System Disability & Industrial Disability Retirement Disability retirementThe cause o

13、f disability need to be related to employment Industrial disability retirementDisability is due to a job-related injury or illness Death BenefitsCalPERS provides benefits to the beneficiaries or survivors of active and retired members upon their death. Benefits and eligible recipients vary based on

14、whether the member was still working at the time of death or was retired. Health Benefits Preferred Provider Organizations (PPOs) Health Maintenance Organizations (HMOs) Exclusive Provider Organizations (EPOs) Long-Term Care BenefitsCalPERS offers three plan options, “comprehensive” “facilities only

15、” “partnership”. Member Home Loan programProgram offers members security, protection, and choice when purchasing or refinancing a home. Mission & Strategic PlanCalPERS has a mission which is to advance the financial and health security for all of members. The company will fulfill this obligation by

16、continually maintaining an environment that produces responsiveness to all participates. The strategic plan is the way to match Assets and Liabilities for more than 1.6 million members and participating employers. CalPERSs business philosophy is customer-oriented. There are four core value There are

17、 four sub-strategic plans that need to be explained in order to implement the overall strategic plan. ENTERPRISEBuild a work environment that values quality, respect, diversity, integrity, openness, communication, and accountability to ensure the sustainability of CalPERS pension and Health benefit

18、systems.Sustain a high performance work culture that utilizing staff development, technology, and innovative leadership and management strategies. PENSION Provide sustainable pension benefit products and services. Administer pension benefit services in a customer oriented and cost effective manner.

19、Educate members to make informed decisions leading to a predictable retirement future. ASSET AND LIABILITY MANAGEMENT Manage the risk and volatility of assets and liabilities to ensure sufficient funds are available to pay benefits and to minimize and stabilize contributions in the long-term perspec

20、tive. HEALTH Develop and administer quality, sustainable health benefit programs that are responsive to and valued by enrollees and employers. Promote the ability of members and employers to make informed decisions resulting in improved lifestyle choices and health outcomes.PerformanceAlthough the c

21、ompany tries to sustain a high-performance, the financial crisis has brought negative efforts to the company. The companys profitability has been hurt badly.Liabilities for CalPERSCalpers liability has been separated into four part of retirement system, Public Employees Retirement System, Legislator

22、s Retirement System, Judges Retirement System and Judges retirement System II. The above graph is the illustration for Public Employees Retirement System. Benefits are paid according to the category of employment and the types of benefits converge provided by employers. There are four categories of

23、membership. Miscellaneous members: staff, operational and all other eligible employees. Safety members: Patrol officers, police officers and other employees whose duties are in active law enforcement. State Industrial Members: employees of the department of Correction and the California Youth Author

24、ity. State Peace Officers Members:Employees positioned in the Government Code or by the department of Personal Administration. Defined Benefit Plan FormulaCalPERS applies the defined benefit retirement plan, and their PBO is calculated based on the assumption of retirement age, salary at retirement,

25、 salary growth rate, multiplier, and the discount rate. CalPERS estimates that the employee will retire at the age of 63, and their expected life expectancy is 75. The salary at retirement is the average salary of the last three years, and we estimate the final salary will increase 2% in order to co

26、mpensate for inflation. The discount rate we use is the 5 year average return on assets. The PBO or the liabilities is the present value of the total future salary. .Details of Asset AllocationBased on the information released by Calperss comprehensive annual report, the current asset allocation is

27、the following: Inflation-Linked AssetThe Inflation-Linked Asset Class compromise four major programs: Commodities, Inflation-Linked Bonds, Infrastructure, and Forestland. The Commodities Program is benchmarked to theGoldman Sachs Commodity Index, and has exposure in commodities futures or comparable

28、 bilateral contracts. Commodities exposures are collateralized with an investment of equal value in cash or high-quality bonds. The inflation linked bond program invests in inflation linked bonds of UK, France, Japan, and Italy. The Infrastructure Program may invest in transportation, energy, natura

29、l resources, water, communications, and related projects. The Forestland Program may invest in timberland and other renewable resources including bio-fuels, pulpwood, and specialty hardwood. Cash EquivalentCalPERSs cash equivalent investments include domestic, international cash equivalents, and int

30、ernational currency investment. Domestic cash equivalents are US treasury bills, which has a total market value around 12 billion, accounting for almost 100% of the cash equivalents. The international cash equivalent is ARS cash reserve, and CalPERS mainly invest in Japanese Yen, South Africa Rand,

31、and Euro for foreign currency investment. Global Fixed IncomeFixed income is another big part of the total funds, it takes up almost 30 percent of the total investment, including domestic, and international debt securities. Domestic fixed income securities are managed internally. These investments i

32、nclude public, private corporate, government agencies, convertible, asset backed and mortgage-backed securities. Among these investments, US treasury is the dominant government bonds they hold. For the corporate bonds, they are mainly holding large multinational companies, such as JP Morgan chase, AIG, bank of America, Goldman Sachs group, and citi bank credit card issuance trust etc. for asset or mortga