PAFR 2008 Investments

INVESTMENTS
LACERA's investment program objective is to provide LACERA participants with retirement benefits, as required by the County Employees Retirement Law of 1937 (CERL). The Board of Investments (BOI) has exclusive control of all retirement system investments. There are a total of nine Board members: four are elected by the active and retired members, and four are appointed by the Los Angeles County Board of Supervisors. The County Treasurer and Tax Collector serves as an ex-officio member.

The BOI has adopted an Investment Policy Statement, which provides a framework for the management of LACERA's investments. This Statement establishes LACERA's investment policies and objectives and defines the principal duties of the BOI, investment staff, investment managers, master custodian, and consultants.

A pension fund's strategic asset allocation policy is generally recognized to have the most impact on a fund's investment performance. The BOI implements the asset allocation plan by hiring passive and active investment managers to invest assets on LACERA's behalf, subject to investment guidelines incorporated into each firm's investment management contract.

LACERA's string of five consecutive fiscal years of strong positive total fund returns ended this fiscal year. The total fund returned a negative 1.4 percent for this fiscal year. However, LACERA's five-year annualized return is still a positive 11.2 percent, net of fees.

FUNDING STATUS
In order to determine whether Pension Plan Net Assets will be sufficient to meet future obligations, the actuarial funding status needs to be calculated. An actuarial valuation is similar to an inventory process. On the valuation date, the assets available for the payment of retirement benefits are appraised. These assets are compared with the actuarial liabilities, which are the actuarial present value of all future benefits expected to be paid for each member. The purpose of the valuation is to determine what future contributions by the members and the County of Los Angeles are needed to pay all expected future benefits.

LACERA's independent actuary, Milliman, Inc., performed an actuarial valuation as of June 30, 2007 and determined that the funded ratio of the actuarial assets to the actuarial accrued liability is 93.8 percent. LACERA's investment returns have exceeded the assumed rate of 7.75 percent over the past several years. These investment gains led to an improvement in the system's funding status and a reduction in the required County contribution rate. The current year's investment losses will be recognized in future actuarial valuations. It is the actuary's opinion that LACERA continues in sound financial condition as of the June 30, 2007 actuarial valuation.

Valuation Date: June 30, 2003        Funded Ratio: 87.2%
Valuation Date: June 30, 2004        Funded Ratio: 82.8%
Valuation Date: June 30, 2005        Funded Ratio: 85.8%
Valuation Date: June 30, 2006        Funded Ratio: 90.5%
Valuation Date: June 30, 2007        Funded Ratio: 93.8%