Investment managers at the Colorado Public Employees’ Retirement Association have earned benchmark-beating returns without piling on more risk, Jennifer Paquette, chief investment officer for the state’s largest public pension plan, told a gathering of financial analysts and professors Thursday night.
Paquette oversees Colorado PERA’s $33 billion portfolio, which is responsible for supporting 370,000 public employees and current retirees in retirement.
The plan has returned 17.1 percent the past year and a half, compared with a 14.5 percent return from comparable benchmarks.
PERA has not invested in hedge funds and has placed more of its fixed income and international stocks in passive portfolios, a strategy considered less risky. It also has managed to lower management costs, Paquette said.
PERA has only 74 percent of the funding it needs to meet future obligations and will eventually need more money via higher payroll contributions by employees or employers, or reduced outlays through reductions in benefits.
“We are managing the investments with an eye on the liabilities,” Paquette told a dinner gathering in Cherry Creek.
Colorado PERA has targeted an 8.5 percent return over the next 40 to 50 years. While some observers consider that goal aggressive, it remains below the 10 percent average return actuaries estimate is needed to cover the plan’s $12.8 billion funding shortfall. Colorado PERA invested aggressively during the 1990s and briefly achieved full funding. Legislators responded by boosting the benefits of the plan, including a lower retirement age. PERA’s more aggressive approach came back to bite it during the stock market downturn that followed from 2000 to 2002.
Staff writer Aldo Svaldi can be reached at asvaldi@denverpost.com or 303-820-1410.
