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From the latest news from AI-CIO (Asset International's Chief Investment Officer) Court Tells San Francisco Pension System to Change its Strategy:

In reaction to weak returns and losses over the last five years--including the 2008 financial crisis--a civil grand jury has investigated the San Francisco Employees' Retirement System's (SFERS) investment strategy, and is not impressed.

Investment Policies and Practices of the San Francisco Employees' Retirement Fund, the report detailing the results of the investigation, rails against SFERS for its "volatile and risky investment policies," "unrealistically high, assumed investment return rate of 7.66%," and for not undertaking a formal "'failure analysis" subsequent to the funding loss suffered in 2008-2009.

Based on SFERS's 2011 annual report, the pension fund has the following asset allocation:

(click to enlarge)

Classifying alternative assets as risk assets, one can see that the fund has about 30% in fixed income and 70% in risk assets (stocks, real estates and alternative assets).

The fund's performance up to 6/30/2011 (its fiscal year end for 2011):

(click to enlarge)

But you can do better than what this pension fund does, even using asset allocation portfolios that are only using six major asset ETFs including Fixed Income, Commodity, Foreign Equity, REITs, US Equity, Emerging Market Equity (see investment plan Six Core Asset ETFs):

Portfolio5 Year Annualized Return10 Year Annualized Return
Six Core Asset ETFs Strategic Asset Allocation Moderate6.6%6.86%
Six Core Asset ETFs Tactical Asset Allocation Moderate12.5%10.1%

All performance data are up to 6/30/2011.

The six ETFs used:

Asset ClassTickerName
Foreign Large BlendVEAVanguard Europe Pacific ETF
COMMODITIES BROAD BASKETDBCPowerShares DB Commodity Idx Tracking Fund
Intermediate-Term BondBNDVanguard Total Bond Market ETF
LARGE BLENDVTIVanguard Total Stock Market ETF

All of these are extremely low cost Vanguard index ETFs. You can certainly use some other more popular ETFs such as SPY, EFA, AGG, as substitutes. But we see no compelling reason to do so since the above ETFs are all liquid enough and perform well to track their corresponding indices.

The Six Core Asset ETFs Strategic Asset Allocation Moderate has the following holdings (as of 8/24/2012):

AssetFund in this portfolioPercentage
US EQUITYVTI (Vanguard Total Stock Market ETF)13.06%
REAL ESTATEVNQ (Vanguard REIT Index ETF)11.76%
Emerging MarketVWO (Vanguard MSCI Emerging Markets ETF)12.01%
COMMODITIESDBC (PowerShares DB Commodity Index Tracking)11.35%
FIXED INCOMEBND (Vanguard Total Bond Market ETF)41.10%

The portfolio has 12% target allocation in each of VTI, VNQ, VWO, DBC, VEA and 40% in BND (bonds). It rebalances monthly. It is that simple.

The Six Core Asset ETFs Tactical Asset Allocation Moderate is a bit involved: in every month, 2 top performing funds from the 6 available funds and cash are chosen for the risk asset allocation and they are invested equally. It is always guaranteed to have at least 40% in bonds. Available funds in the plan are chosen for each asset selected. The selection criterion is based on performance trend scoring. It is still simple enough for anyone to follow this portfolio.

No wonder the court made those suggestions to SFERS. You certainly can take care of your financial destiny better than anyone else, if you are willing to stay on the course and spend a few minutes every month on your portfolios.

Disclosure: I am long SPY, VNQ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.