Investment board: Pension fund is down

By Adam Wilson | The Olympian • Published October 13, 2008

• Comments (0)

Events of the past few weeks have rocked the financial world, including retirement funds, which have sustained more than $2 trillion in losses nationwide over 15 months, according to a congressional estimate.

The Washington State Investment Board manages $78 billion in holdings that help pay for public employee retirements, along with the money contributed by the workers and their employing agencies.

That fund has seen a decline in value as stock prices plunge, and wrote off $177 million in losses in the past month because of the failure of two major companies.

The Olympian asked the board's executive director, Joe Dear, about the status of the fund:

Question: How is the ongoing turbulence on Wall Street affecting the pension fund?

Answer: The most recent turmoil has affected assessed values across the portfolio. But there have been no realized losses like we took on Washington Mutual and Lehman Brothers investments. As the U.S. and European market falls, the value of the investment falls. The portfolio is down.

Q: Are there more losses coming like those in Washington Mutual and Lehman Brothers?

A: Now essentially everything is guaranteed by the Federal Reserve. Commercial paper is guaranteed by the Federal Reserve; the bonds taken over are going to be protected. The bailout bill passed last week has provisions for securities. Am I saying there's not going to be surprises? No. But the government has done everything it can to back securities.

Q: What kind of action are you taking based on recent events?

A: We watch market conditions closely, but our view is still to invest for the long term. We're not planning any immediate moves. We keep a long, steady view and remember the virtue of a long horizon.

Q: What sorts of investments other than stock are in the pension portfolio?

A: Fixed-income investments: corporate bonds, government securities, mortgages. Real estate, private equity and real assets — things like timber, natural resource rights.