Please ensure Javascript is enabled for purposes of website accessibility

Investing Guidance From CalPERS

By Selena Maranjian - Updated Apr 5, 2017 at 7:52PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Invest like a big pension fund.

You know what CalPERS is, right? The California Public Employees' Retirement System manages pension and health benefits for about 1.6 million public employees, retirees, and families in the Golden State. Even if you live in Davenport, Iowa, you may have heard of CalPERS, just because it's so big. At the end of October last year, it peaked in value at $261 billion. Got it? Big.

Of course, as you might expect, it's a little less big now than it was last year, thanks to a little turbulence in the stock market. As of Dec. 4, it had dropped to $179 billion, down 31%. Here are some of the stocks it held as of Sept. 30:

Stock

Value of Holdings (millions)

ExxonMobil (NYSE:XOM)

1,321

Wal-Mart (NYSE:WMT)

775

Procter & Gamble (NYSE:PG)

640

Microsoft (NASDAQ:MSFT)

562

General Electric (NYSE:GE)

541

AT&T (NYSE:T)

531

Johnson & Johnson (NYSE:JNJ)

529

Source: Capital IQ, a division of Standard and Poor's. Market value based on current share prices.

Still, that's considerably better than the S&P 500, which is down some 44% in the same period.

The explanation is simple: management. While some managers of companies and funds have steered their charges over cliffs, others have proven to be more prudent stewards. CalPERS, for example, uses "smoothing" mechanisms to reduce the effect on the fund of big market swings. While the market was advancing, between 2004 and 2007, the fund reserved some 14% of its assets as a hedge against a downswing.

I liked what I read of comments from CalPERS staffers. Rob Feckner, president of the CalPERS board, noted, "Our job is to make sure we protect the system and the funds that are there for the pensioners." If only more CEOs had such an outlook! They might then not have taken some of the risky chances they took, some of which wiped out companies like Lehman Brothers.

California's state teachers' retirement system, CalSTRS, has been similarly managed, with its spokesperson, Sherry Reser, explaining, "As a patient, long-term investor, we're built to make it through these ups and downs. We're a forever investor. There is going to be a recovery; we've done this before."

That should be how we think about our own investments. We should always be taking a long-term view, since no one can know what will happen in the short run. We should also brace ourselves for occasional downturns. And if we've accumulated some cash with which to take advantage of rare opportunities, all the better. (My colleague Tim Hanson has called today's market the best opportunity in 35 years!)

Longtime Fool contributor Selena Maranjian owns shares of GE, Johnson & Johnson, and Wal-Mart. Johnson & Johnson is a Motley Fool Income Investor selection. Wal-Mart and Microsoft are Motley Fool Inside Value recommendations. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$129.82 (0.96%) $1.24
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$287.02 (-0.74%) $-2.14
AT&T Inc. Stock Quote
AT&T Inc.
T
$18.04 (0.17%) $0.03
Exxon Mobil Corporation Stock Quote
Exxon Mobil Corporation
XOM
$93.19 (2.89%) $2.62
General Electric Company Stock Quote
General Electric Company
GE
$78.90 (2.28%) $1.76
Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$167.14 (-2.07%) $-3.53
The Procter & Gamble Company Stock Quote
The Procter & Gamble Company
PG
$145.26 (-0.71%) $-1.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
390%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.