We wrote an article in January 2011 that reviewed the performance of the largest pension fund in the nation -- Calpers (California Public Employees' Retirement System). In the article, we compared its performance with that of a strategic asset allocation from California State University and Public Employees Savings Plus Plan. For more information on the plan's investment choices and their performance, see this document. The plan consists of 12 low cost Vanguard index funds. These funds enable participants to gain exposure to 3 major assets: US Equity (SPY or VTI), Foreign Equity (EFA or VEU), Fixed Income (AGG or BND).
| Asset Class | Ticker | Name |
|---|---|---|
| SMALL BLEND | NAESX | Vanguard Small Cap Index |
| SMALL BLEND | NAESX | Vanguard Small Cap Index |
| Foreign Large Blend | VGTSX | Vanguard Total Intl Stock Index |
| MID-CAP BLEND | VIMSX | Vanguard Mid Capitalization Index |
| MID-CAP BLEND | VIMSX | Vanguard Mid Capitalization Index |
| LARGE BLEND | VFINX | Vanguard 500 Index Investor |
| LARGE BLEND | VFINX | Vanguard 500 Index Investor |
| LARGE BLEND | NBSTX | Neuberger Berman Socially Resp Tr |
| Intermediate-Term Bond | VBMFX | Vanguard Total Bond Market Index |
| Intermediate-Term Bond | VBMFX | Vanguard Total Bond Market Index |
| Short-Term Bond | VBISX | Vanguard Short-Term Bond Index |
| ROOT | CASH | CASH |
The previous article revealed that professors and staff participating in the defined contribution plan California State University and Public Employees Savings Plus Plan can do better by using a simple diversified portfolio that periodically rebalances. The data was up to 6/2010, the fiscal year ending for CALPERS.
Let's have an up to date review, now that CALPERS has its annual report for 2011 published (ending on June 30, 2011). The report shows the following performance:
(click to enlarge)
The following is the performance of California State University and Public Employees Savings Plus Plan Strategic Asset Allocation Moderate that has 60% in stocks and 40% in bonds, closely matching Calpers' risk profile.
Annualized Return (ending on June 30, 2011)
| Name | 1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
|---|---|---|---|---|
| California State University and Public Employees Savings Plus Plan Strategic Asset Allocation Moderate | 20.04% | 4.17% | 4.76%% | 6.37% |
Other than slightly outperforming in the last one year, CALPERS portfolio lagged in the past 3, 5 and 10 years.
Sound asset allocation and disciplined rebalance can help individuals to do no worse or even better. One can take control of his/her retirement if regular efforts (30 minutes a month?) are made.
Disclosure: I am long SPY, BND.
