California State University Professors Are Better Off Than Their CALPERS Pension Funds

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 |  Includes: AGG, BND, EFA, SPY, VEU, VTI
by: MyPlanIQ

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
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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:

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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%
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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. 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.