High level Republicans in Indianapolis have leaked the news that the Daniels’ Administration has invested Public Employee Retirement Fund, & Teachers Retirement Fund (billions of dollars together) into the stock market. Word is that they have lost enormous value in the recent market ‘correction’.
The Republicans are justifiably scared to death that this will get out, and with good reason. In their words, ‘If this is publicized, then this election is over and we’ll be lucky to win dog catcher at the polls this year.’
From the Howey Political Report on October 1, 2008:
”WALL STREET MELTDOWN LOWERS VALUE OF STATE INVESTMENTS: The volatility on Wall Street has taken a bite out of PERF and TRF investments by the state of Indiana. Asked about the status of state investments, Gov. Daniels spokeswoman Jane Jankowski told HPI on Tuesday, “PERF and TRF started to invest in the stock market 10 years ago and over the past few years, their stock market exposure has gradually been reduced. The funds both still invest in the stock market and these assets have a lower market value right now than a month ago; however, PERF/TRF are long-term investors, not market timing investors.”
While Jankowski claims PERF has been reducing their investments over “the past few years,” a September 2008 Business Week article says exactly the opposite. Entitled “Hopped Up On Hedge Funds,” the article calls out the state for “taking bigger risks with taxpayer money.”
The Business Week article says, “Public pension funds have taken heat lately for a slew of problems. From New York to Ohio, critics have lambasted them for inadequate disclosure, mismanagement, and promises to retirees that could leave taxpayers holding the bag. So it seems an odd time to plunge deeply into hedge funds and other risky so-called alternative investments.
Yet that’s precisely what the Indiana Public Employees’ Retirement Fund wants to do. The board of the $14.6 billion pension fund, which oversees the retirement of 220,000 state employees, voted in late August to bump up its alternative investment target to 15% from 5%. It also broadened the menu to include not only private equity and real estate but also hedge funds and commodities. And Indiana said it would cut its safest holdings, bonds, from a target of 30% to 20%. All this from a state that began investing in stocks only 10 years ago.”
Reports have it that the state lost 7% of the value of these funds even before yesterday’s sell off. With that additional loss and the potential for an even further slide in market value, these two retirement funds could lose 20% or more of the value of their market exposure.