Christopher Ailman, chief investment officer of the $184.8 billion California State Teachers’ Retirement System, West Sacramento, said that there is a “subtle trend” of pension funds willing to add leverage, during a panel discussion at Pensions & Investments’ Investment Innovation and the Global Future of Retirement conference.
“It’s all about squeezing more return,” said Roger Urwin, global head of investment content at consulting firm Towers Watson. Mr. Urwin said he has also seen the trend and that there are about eight pension funds that are leveraged 150% to 200%.
“It seems like a contentious area of discussion,” Mr. Urwin said.
Mr. Ailman added that leverage isn’t bad, it just amplifies the risks.
“I have a problem with leveraging up bonds,” Mr. Ailman said.
Pension funds are adding leverage because it is difficult to get 7% or 8% returns in this economic environment, Mr. Ailman said.