PERS financially sound

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October 12, 2008

Anonymous The Meridian Star Sun Oct 12, 2008, 12:19 AM CDT

Over the past several weeks, the financial markets have shown dramatic volatility, leading to increased concerns over the U.S. economy in general, and, for our members and retirees, the impact on the Public Employees’ Retirement System of Mississippi (PERS). First and foremost, PERS remains financially sound, and the retirement benefits of our members and retirees are secure.

A very natural reaction to what is currently happening in the financial markets and with our economy in general is for our members and retirees to be concerned about the security of their retirement benefits; however, their retirement benefits, including annual cost-of-living adjustments to retirees, are constitutionally protected, guaranteed by law, and not directly influenced by the day-to-day fluctuations in the markets.

Like all investors and public pension programs, PERS has been affected by the significant downturn in the markets. However, PERS investments are well-diversified in a strategic asset allocation mix that includes U.S. and foreign stocks, fixed income bonds, real estate, and cash. This mix helps to moderate the impacts that one company or a few companies may have on the performance of the total fund and can help offset some of the potential losses in the portfolio during times of negative volatility like we are experiencing now. During such times, it is important to not overreact with quick buys or sells. Historically, distressed markets have offered long-term investors attractive investment opportunities and our professional investment managers are evaluating such opportunities daily.

Since the inception of PERS more than 55 years ago, the Board of Trustees has maintained a prudent investment philosophy. One cornerstone of this prudent philosophy is investing for the long term. PERS entered the stock market 27 years ago in fiscal year 1981. Since then, we have experienced positive returns — as high as 31.2% — with the exception of three years, 2001, 2002, and 2008, when negative returns were recorded. Our rate of return for the fiscal year that ended June 30, 2008, was negative 8.2%, reflecting a loss in market value of $2.1 billion since the 2007 fiscal year end. Total assets were $19.7 billion at the end of the fiscal year. However, our annualized return for that 27-year period that ended June 30, 2008, is 11.6%, exceeding our assumed actuarial rate of return of 8%, emphasizing that our prudent investment philosophy has paid dividends over time.

These are turbulent times, but they are not unprecedented. As participants in a defined benefit plan that is supported by a professionally managed, well-diversified portfolio, it is in times such as these that our members and retirees can be particularly at ease that their benefits are guaranteed and not tied to any account balance that may go up or down. Funds used to pay benefits come into the Retirement System through member and employer contributions and from the earnings on invested assets. While the market value of the fund may fluctuate, as do the markets in general, the fund used to support current and future benefits is sufficient to meet our guaranteed obligations for many years to come. We have withstood volatility in the markets in the past and will withstand these tumultuous times as well.

Pat Robertson

Executive Director

Public Employees’ Retirement System

of Mississippi

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