Check out this chart from p. 55 of the report:
Let me get this straight. We expect our investment asset classes to earn around 5%, but when we put it all together it will magically earn 7.75%? Who’s in charge? Bernie Madoff?
Figure in expenses, commissions ($7.6 million last year alone) and what not and the investment assumption should be, what? 4.5%? That seems possible in the current economic climate.Of course, it could be worse over the next 10 years or so.
For the past year the actual investment return was 3.4%.
And check out page 7 of the separate PERS Projection_Report
On a 10 year annualized basis, PERS investment returns have not met the 8% investment return assumption in 10 years!
The reports should contain a disclaimer: “barring a miracle, this ain’t happening.”
PERS justifies its lofty investment assumption by pointing out that 25 year historical returns hit the number. But there’s a problem with that: the 1990’s.