California Pension Fund Hopes Riskier Bets Will Restore Its Health

From John Curry, July 24, 2009

SACRAMENTO — Big as California’s budget woes are today, so are the problems lurking in its biggest pension fund.

Hoping to Recover From a Bad Year

Daniel Rosenbaum for The New York Times
July 24, 2009

Under Joseph A. Dear’s leadership, the Washington State public pension fund gained a reputation as a daring investor. The fund, known as Calpers, lost nearly $60 billion in the financial markets last year. Though it has more than enough money to make its payments to retirees for many years, it has a serious long-term shortfall. Meanwhile, local governments in the state are pleading poverty and saying they cannot make the contributions that would be needed to shore it up.

Those problems now rest largely on the slim shoulders of Joseph A. Dear, the fund’s new head of investments. He is not an investment seer by training, but he thinks he has the cure for what ails Calpers, or the California Public Employees’ Retirement System, the largest in the nation with $180 billion in assets.

Mr. Dear wants to embrace some potentially high-risk investments in hopes of higher returns. He aims to pour billions more into beaten-down private equity and hedge funds. Junk bonds and California real estate also ride high on his list. And then there are timber, commodities and infrastructure.

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