CalPERS exceeds its actuarial rate over the long term

CalPERS' latest fund performance summary provides actuaries some ammunition to argue that pension liabilities should be discounted at their long-term assumed rate of return. Over the 10- and 20-year periods ended Sept. 30, CalPERS has exceeded its assumed actuarial rate by 17 and 27 basis points, respectively. Many economists, on the other hand, take the view that liabilities should be discounted at the risk-free rate and that the hope of achieving 7% to 8% annualized returns from riskier assets is not a sound strategy under the current investment landscape. Only time will tell which side is correct, but CalPERS has shown it has been able to exceed 7.5% over the past 20 years.

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