LACERS $9 Billion Fund*: Where Does This Money Come From?

Each LACERS Member contributes a percentage of their paycheck (those hired on or after January 1, 1983 contribute 6%) to LACERS to fund their retirement benefits. Also, the City contributes money to LACERS each year. LACERS’ Portfolio Management section invests these contributions, and the earnings and losses on these investments either increase or decrease the fund assets.

Making sure that LACERS’ funds are directed towards investments that will perform well, given existing market conditions, is critical. LACERS’ asset allocation (or how the funds are distributed among the different types of investments) and diversifying risk ultimately determines the success of our fund and thus our ability to meet long-term liabilities, provide benefits, and defray City contributions.

* The fund value is based on market value of investment holdings.

How LACERS Ranks With Other Public Retirement Funds

LACERS’ investment strategies have proven to be successful. Although market conditions continue to shift, LACERS has performed well over the course of the last several years. As with other pension plans, steep declines in the equity markets of 2000, 2001, and 2002 were responsible for a loss of fund value during those years. However, LACERS altered its strategy and experienced a strong recovery. As of 12/31/2005, when compared to all public retirement funds valued at over $1 billion, LACERS was ranked:

• 1-year period - top 28th percentile (better than 72% of pension funds)
• 3-year period - top 14th percentile (better than 86% of pension funds)
• 5-year period - top 13th percentile (better than 87% of pension funds)

Additionally, a recent cost-effectiveness analysis of LACERS’ fund (for the five-year period of 2000 - 2004) performed by Cost Effective Measurement, Inc. found that our 5-year policy return was higher and our 5-year implementation risk was lower than the U.S. median. The report also revealed that the costs associated with contracting external investment managers are classified as “low” and the higher returns outweighed these costs. For 2004, LACERS was in the high value added, low cost quadrant of a cost-effectiveness chart, which means that LACERS has been investing efficiently and effectively.

LACERS will continue to search for new means of investing so that we can continue to be a leader in the public pension world and secure your retirement benefits.