The members of the ACERA Board of
Retirement are ultimately responsible for diversifying
ACERA’s investment assets, which is how we control the risk of
investing. The Board members ensure that investments are made in
a variety of securities,
in an assortment of companies, and in a range of regions of the
world. They also ensure that assets are managed by professional
Our Investment Team
To accomplish these tasks, the Board, ACERA’s Chief Investment
Officer Betty Tse, and her
nine-person team of investment professionals (who are county
employees) work with an investment consulting firm to establish
ACERA’s Investment Plan and Policy. They share a fiduciary
responsibility to ACERA’s fund and ACERA’s members, so they take
a long-term, low risk investment strategy. This highly regulated
responsibility is vested in ACERA by state laws and ACERA’s
participating employers. To understand this prudent strategy,
you’ll first need to understand why and how ACERA invests:
ACERA Works For Its Members
If you’re currently working as a public employee, you’re going to
need money to pay for your life after retirement. This is why the
county started the pension fund (ACERA) in 1948. You pay part of
your wages into ACERA’s fund every time you get paid, and your
employer also makes a contribution on your behalf.
ACERA could simply save this money in a bank account for you
until you retire, but then it would be difficult to pay the level
of retirement benefits you earned with just the interest earned
from these two contributions. This is where investing comes in.
What is an Investment?
People and organizations all over the world want to borrow money
to take their business to the next level. For instance, a
high-tech company in Silicon Valley needs money to develop a new
medical device, while a municipality somewhere in the country may
need money to improve the roads and build a new library. The
high-tech company might sell shares in the company in the form of
stock, and the city might issue and sell bonds to investors to be
paid back at a future date. If you invest in or loan these
entities your money, you’ll get investment return or interest
(more money) for the use of your money if the endeavor goes well.
In order to manage risk, ACERA invests in a diverse group of
investments called asset
classes. ACERA’s investment team, investment consultants, and
Board of Retirement together strategically determine the portions
of the fund to allocate to the classes of assets in order to
balance risk and return.
Hiring the Experts—Investment Managers
Once ACERA decides what percent of the fund to invest in each
asset class, ACERA doesn’t just go out and start buying. We hire
investment managers who are
experts in particular types of asset classes to make the
investments for us.
These investment managers are selected through a rigorous and
well-thought-out due diligence process: our investment consulting
firm and ACERA staff conduct thorough research to identify the
best managers—including comprehensive in-person interviews and
site visits—before recommending these investment managers to the
Board of Retirement, which reviews and has the final authority on
whether to hire an investment manager or not.
A Prudent Process
ACERA’s investment team continually monitors the performance of
these investment managers. Many of these managers are subject to
ACERA’s periodic review process, which requires the managers to
review not only their investment performance, but also their
strategy, philosophy, and outlook on the markets, and present to
the Investment Committee of the Board of Retirement. Managers
that do well are retained. Managers that don’t do so well are put
on a watch list where they’re put on notice, and can ultimately
be terminated by the Board, all in accordance with ACERA’s
pre-established Investment Policy.
ACERA’s ultimate investment goals are to maximize its investment
returns to pay benefits and defray expenses of administration,
while at the same time minimizing risk by investing in diverse
assets (not keeping all our eggs in one basket) and by diligently
monitoring the performance of the assets we are invested in.
Because the investment market has its ups and downs, ACERA takes
a prudent and long-term approach toward investments. This means
we don’t make rash decisions. We establish long-term investment
strategy and implement it methodically, monitor the success of
the strategy prudently, and modify our approach as needed.