A recent article in the Washington Post raised serious issues about the sustainability of public pension funds in light of the recent market downturn. It is true that this downturn had a negative impact on public pension systems throughout the country, including LASERS. Our market rate of return for the fiscal year ending June 30, 2009, was -19.1%. However, this financial crisis is not unprecedented, nor has it thrown us a curve that we are unprepared to handle.
Looking back, LASERS portfolio, as well as those of other public pension funds, was dramatically affected by the down markets following the events of September 11, 2001. However, by 2004, we experienced a tremendous rebound with a market return of 18.0%. Our plan then continued to make impressive gains, achieving a 19.2% market return in 2007.
LASERS Board of Trustees has maintained a sound approach to our asset allocation that does not veer off course due to market swings. We have great confidence in the long term soundness of our investment approach, making modest adjustments over time when appropriate, while never overreacting to any one year market return.
Because our returns are “smoothed” over a period of three years, we are protected from the direct impact of extreme swings in our bottom line returns. In addition, one-third of our portfolio is managed internally by seasoned LASERS professionals, saving our system millions of dollars annually. “A renewed appetite for risk” to pump up returns, as is mentioned in the article, has no place in the LASERS more than 60 year investment strategy, which continues to serve our members and our state well.
I will note also that many public pension systems, like LASERS, have been saddled with debt that resulted when benefits were granted but not sufficiently funded. In Louisiana, we are fortunate to have a constitution that protects pension benefits and requires that the initial debt of our system be paid by the year 2029. We also have a system that requires our employees to pay a significant portion of their benefits.
It is true that this has been a difficult year for many Americans. While our members have certainly felt the effects of rising costs, they can remain confident in the sustainability of our pension system and in the solid, long term asset allocation that guides our efforts.
Louisiana State Employees’ Retirement System (LASERS)