Gary Russell comments.....

Gary Russell to Molly Janczyk, November 12, 2009
Subject: RE: Gary: Reality: ORC: Reduced pensions, changing law, investments, benefits for actives and retirees

Molly,

This is a good summary of our conversation. As we talked about, there are a lot of moving parts to this and a change in one area will have ramifications in another area. In regards to the 8% investment assumption, I wouldn’t describe the current asset allocation as high risk rather it is a higher risk allocation than would be needed for a 7% assumption for example. The level of risk needed for an 8% return is still a prudent level of risk. For example, an 8% assumption doesn’t require STRS Ohio to be 100% invested in the equity market. Also, a 7% return couldn’t be achieved with a risk-free asset allocation, but the allocation could have less risk than is needed for an 8% return.

I hope this helps,
Gary