The Goober of KochWalkerstan is at it again.
Scott Walker wants to radically alter the public employee pension system in Wisconsin (WRS). He will turn a 97% funded defined benefit system into a high risk defined contribution system, enabling his investment house buddies to cash in big while recipients lose the safety and security of one of the best retirement funds in the country! [my bolding]
URGENT ALERT TO WRS PARTICIPANTS!
I just opened the following e-mail, time-stamped 11:44 AM 01/02/2017, forwarded courtesy of Move On.
Anticipating attack from the locust swarm, the Executive Director of the State of Wisconsin Investment Board (SWIB) has sent this informational letter to Wisconsin Retirement System (WRS) participants, making the case that the board has managed the fund with professional integrity.
The WRS is under renewed attack.
Please read this letter if you value a secure retirement.
Kathleen [from MoveOn.org]
An Open Letter from SWIB's Executive Director to WRS Members
January 31, 2017
Dear WRS Member,
When you say Wisconsin, what comes to mind? It could be the strong work ethic of the people who live here. Maybe it’s the numerous summer festivals that take place in communities large and small all across the state. Or maybe it’s the pride so many of us share each and every weekend cheering on the Badgers or the Green and Gold. For those of us who have spent our careers serving the people of this state, it might just be that Wisconsin has one of the best-funded public pension systems in the country.
In a time when many public pension funds are struggling with issues related to underfunding, the Wisconsin Retirement System (WRS) remains among the few that are financially strong. One reason the WRS is so well-funded is the investment management provided by the State of Wisconsin Investment Board (SWIB). SWIB has developed a disciplined, prudent and innovative investment strategy designed to protect the members of the WRS from another major reduction, keep contributions stable and generate reasonable returns. SWIB’s management of the trust funds has helped protect and grow the assets that more than 600,000 members of the WRS count on for a more secure retirement.
Following a recently released audit report by the Legislative Audit Bureau (LAB), there have been some opinions expressed about the work SWIB has done in managing the trust funds. Last week, staff from both LAB and SWIB presented and answered questions in a transparent and open hearing with the Joint Legislative Audit Committee. Topics discussed included the audit report, SWIB’s 2016 results and overall approach, and steps taken by SWIB to properly diversify the WRS and help keep it well-funded. Below are just a few of the key points that were discussed.
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SWIB has generated positive returns in eight of the last 10 years. SWIB’s consistent performance over that time period has accounted for 72.6 percent of the total income of the WRS.
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The Core Fund’s 5-year return at the end of 2016 was 8.1 percent, compared with a benchmark of 7.7 percent and the assumed rate of 7.2 percent.
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Over the last five years, from 2012-2016, after accounting for costs, SWIB staff added an additional $1.1 billion to the trust funds above what the markets earned. Had we completely indexed both trust funds, we would have lost out on this added value.
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SWIB’s 2015 returns ranked 9th in LAB’s peer group. However, that was at one point in time and SWIB has ranked near the top in past periods. SWIB’s 2016 returns were again strong and, based on preliminary numbers, one national comparison ranks SWIB in the top quarter of 55 public pension funds for the year.
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Compared with LAB’s peer group, the WRS is the best funded plan and has the second lowest assumed rate of return. The average funding ratio of LAB’s peer group is 74 percent. The WRS is funded at 100 percent.
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Unlike some peers, who may be reaching for returns out of necessity and be over concentrated in stocks, SWIB has built a very robust asset allocation. This ensures that returns are still strong when the markets are hot but that the impact of a future downturn is lessened for our retirees.
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SWIB’s use of leverage is modest and was 7 percent at the end of 2015. This leverage helps to reduce risk to the Core Fund by supporting a higher allocation to lower risk fixed income securities and lower allocation to equities at the same target return.
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SWIB staff can invest many of the assets of the WRS for one-fifth of what it would cost to pay external managers for the same work. That is why SWIB uses its own staff to invest almost two-thirds of retirement fund assets.
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Internal management of the trust funds has been a financial benefit. A 2015 report from an independent consultant shows that SWIB’s total costs were second lowest in its peer group of 15 large pension funds.
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Because of a greater reliance on internal management, SWIB is saving $75 million per year compared to what similar funds would pay to manage the same assets. Over the past 10 years, SWIB has saved $344 million compared to similar funds in large part because of the transition away from external managers for public markets. That is more than SWIB spent in all of 2015.
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While SWIB does invest in some investments that can be considered more risky, like hedge funds and derivatives, a recent consultant’s report analyzed the risk/return ratio for 65 pension plans over a 10-year period and ranked the WRS near the top third of a group on a risk-adjusted basis. Eight of the nine plans listed in the recent LAB audit report were included in this analysis and only two ranked higher than SWIB during this period. This means that when SWIB is taking risk to generate added value, it is being well compensated for the risk taken.
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SWIB’s incentive compensation plan is a true pay for performance plan that focuses on long-term results by being heavily weighted toward the five-year returns. Bonuses were awarded in 2015, despite a slightly negative year-end return, because SWIB’s five-year return was a solid 6.7 percent. The deferral option that the Board can use is primarily intended to delay awards after catastrophic losses like what occurred in 2008.
The WRS is looked at as a model system by many other pension funds. SWIB is proud of the work it has done to make Wisconsin strong and we wanted you to know the facts, not just the opinions that might be floating around.
Sincerely,
Michael Williamson
Executive Director
[State of Wisconsin Investment Board (SWIB)]
As a participant, I have been very satisfied with their management [transparency, adherence to good-faith communications, courteous customer interactions, timely mailing of notices, etc.] I do not want to trade in the blessings that my retirement benefits have provided me for a mess of putrid pottage.
I do not want to lose the safety and security of one of the best retirement funds in the country in order for Scott Walker to buy more friends by enabling his investment house buddies to cash in big by casting the whole time-tested-and-true system we now have into chaos. They have already shown that they will lie, cheat, and steal to get their way.
“DON’T FIX IT IF IT AIN’T BROKE!”