Kathleen Connell, California state controller, should stop playing politics with words and the California State Teachers' Retirement System.
Ms. Connell criticized Thomas E. Flanigan, chief investment officer of the retirement system, over the performance of the $68 billion pension fund, claiming the fund had a $1.8 billion "loss" because of its low domestic equity allocation.
The word obviously was chosen for its political impact. By Ms. Connell's reasoning, every pension fund in the country suffered a "loss" last year because not one was 100% in equities for the whole year.
The CalSTRS fund didn't lose any money last year. Its assets are not worth less than they were at the beginning of the year - they are worth more, just not as much as they might have been if invested differently. As Ian Lanoff, the fund's fiduciary counsel, correctly pointed out, the correct term for what Ms. Connell was criticizing was "opportunity cost."
The key thing for the trustees to examine is Mr. Flanigan's decision-making process that led him to the low domestic equity allocation. If it is flawed, then corrective action should be taken.
In the meantime, the only loss evident is Ms. Connell's loss for words and clear thinking.