Nevada Retirement News

Public Employees Retirement System
Summer 1999

You may have heard about legislation being considered by Congress to reduce certain federal taxes. Included in Congress' tax relief bill are many provisions that would strengthen the retirement saving programs of public employers and their employees. We are hopeful that the President and Congress will work toward a compromise on those issues of contention and retain the important provisions related to retirement savings and portability.

Of particular importance to the public pension industry are provisions that would:

Given recent volatility in the investment markets, we thought it timely to reflect on one of the key components of the investment strategy for the PERS' fund, a disciplined approach.

Charles Ellis, in his book Investment Policy, addresses the importance of following a sound investment process:

"Clients can do more for their portfolio's long term rates of return by developing and sustaining wise long-range policies that commit the portfolio to an appropriate structure of investments than can be done by the most skillful manipulation of the individual holdings within the portfolio."

Developing policy, whether as an individual or institution, is an important component in the investment process. It forces us to define objectives and risk tolerance and provides the discipline needed to follow the plan. When markets move out of favor, the natural tendency is to "time the market" and sell under-performing assets at what may turn out to be the bottom of the market. Thus we end up "selling low and buying high." Having a plan designed to meet specific financial objectives within a defined risk profile will help prevent this.

The most important aspect of PERS' program is the asset allocation policy. Numerous studies have determined the majority of investment return and risk will be explained by asset allocation. Said another way, the decision to invest in stocks or bonds will more significantly affect portfolio performance than the decision to invest in General Motors or Ford.

The Retirement Board has established an asset allocation policy of 32% U.S. stocks, 8% international stocks, 40% U.S. bonds, 10% international bonds and 10% real estate. By investing in different markets simultaneously, we are diversifying (risk management) such that a disappointing event in one market will not adversely affect the entire fund to the extent we can not achieve our long-term goals.

We utilize a dollar cost averaging process to maintain the allocation. For example, if stock prices rise, we use income and contributions to buy bonds to maintain our targeted exposure. Over time, this process generally outperforms a "buy and hold" strategy where the asset allocation is allowed to drift with movements in the market.

Another important component of our plan is review and monitoring. For example, we review market values, security compliance and manager performance on a monthly basis. The fundamental components of the investment program, including asset allocation, are reviewed annually by the Retirement Board. Strategy changes are viewed from a long-term perspective; while we are aware of market activity, we do not let it drive changes in fundamental strategy.

At PERS', our investment objectives are focused on providing secure retirement benefits into the future at a stable cost. Following a disciplined process is the key component in achieving that goal.

Governor Guinn appointed Charles Silvestri to the Retirement Board as our new retiree member. Mr. Silvestri replaces Dr. Al Johns in that capacity. Mr. Silvestri comes to the Retirement Board with tremendous experience, having been employed with the Clark County School District as a school teacher, Manager, Associate Superintendent and Deputy Superintendent. While the Associate Superintendent, Mr. Silvestri served as the chief personnel officer for the school district. He was responsible for the district's grievance procedure and served as the district's negotiator with its three employee unions. As Deputy Superintendent, Mr. Silvestri served as the school district's lobbyist in the Nevada Legislature.

Mr. Silvestri also worked for Southwest Gas as the Director of Consumer and Community Relations, responsible for planning, directing and evaluating corporate activities relating to public affairs, communications and consumer and community affairs. He worked to enhance relationships with state and local governments in both Nevada and California. We look forward to working with Mr. Silvestri as the Retirement System moves into the new century!

If you would like to have a PERS presentation at work, let us know. We offer presentations to payroll clerks and liaison officers on reporting issues, as well as talks for members on our benefit structure. To arrange an on-sight presentation ask your liaison officer to contact us, or call PERS at (775) 687-4200.

We recently moved to a new membership computer system, allowing us to upgrade the amount of information you receive on your Member Statement each year. Starting with Fiscal Year 1999 statements, you will receive information on your specific account, refunds, our purchase of service program, estimating your retirement benefit, disability and survivor benefits.

We will also be asking for your assistance in capturing your named beneficiaries' social security numbers. This helps us keep our records up to date so that we can be serve you. Look for your new statement in the near future!

In our spring quarterly newsletter, we used terminology regarding Senate Bill 9 that was imprecise. We referred to purchase eligibility for teachers at "at risk" schools. Purchases under this bill will be made in accordance with the provisions of this bill for teachers at schools within a school district, which for that school year, carries the designation of demonstrating inadequate achievement pursuant to NRS 385.367.