Financial Services Industry
Industry: Email Alert RSS FeedCalPERS: `reality check'; Avoiding future bouts of irrational exuberance is main objective.(Special Report: Risk Management)
Pensions & Investments, July, 2005 by Chernoff, Joel
Byline: Joel Chernoff SACRAMENTO, Calif. - In the late 1990s, equities delivered double-digit returns while stock market volatility declined. Fed this data, the typical optimizer told pension executives to keep loading up on stocks. That answer quickly proved to be wrong with the subsequent collapse of the tech-stock bubble Officials at the $187 billion California Public Employees' Retirement System in Sacramento want to avoid any future irrational exuberance.
In an unusual move for a pension fund, CalPERS' officials have devised a way to impose a "reality check'' on the total portfolio by running a "reverse optimization,'' said Mark Anson, chief investment officer. While investors pump historical data, interest-rate and return assumptions into a...
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