Investment Update

Dear ACERA members:

Please be assured that no ACERA members’ and retirees’ benefits are in jeopardy even though we are currently experiencing unprecedented volatility in the financial market. ACERA has sufficient reserves to weather this financial storm and pay accrued benefits for members and retirees for many decades. According to our most recent actuarial valuation, ACERA is approximately 90% funded.

All institutional investors have suffered significant paper losses as a result of the recent stock market fluctuations. In fact, October 2008 was one of the most volatile months our portfolio has experienced - our record shows that ACERA’s total Fund incurred a single month loss of about $641.1 million ($76 million of this loss was actual and the rest is on paper). Our preliminary estimate indicates that for the first ten months of this year, ACERA’s total Fund incurred a loss of approximately $1.7 billion on paper (this loss was inclusive of $118.5 million actual gain). This loss represented about 30.1% of ACERA’s total Fund. As of 10/31/08, ACERA had approximately $509.7 million invested in stocks in the financial sector such as banks and insurance companies stocks, representing about 13.1% of ACERA’s total Fund. Due to holdings of some of the well publicized financial sector stocks such as AIG, Fannie Mae, Freddie Mac and Citigroup, etc., ACERA’s total Fund incurred a loss of approximately $128.7 million ($113.8 million on paper and $14.9 million permanent), this loss represented about 3.3% of ACERA’s total Fund. However, a snapshot taken on any one day or week is likely to be misleading due to the unprecedented market volatility.

ACERA is a long-term investor with a well diversified conservative portfolio. Besides investments in financial sector, ACERA’s portfolio also holds securities in well-established and fundamentally sound companies, such as Walmart, IBM, and Johnson & Johnson, from other sectors such as consumer staples, health care, and industrials. We expect the market to recover eventually, though it is not clear when a recovery will take place.

- Last Modified: 2008-12-17 11:23:36