General Ret system 2012 report

[Honky Tonk]

Because the floundering entity is dysfunctional and poorly managed?

Absolutely. People are still having a hard time coming to grips with the fact the party's over. They still think it's 1959.

[Wesley Mouch]

Absolutely. People are still having a hard time coming to grips with the fact the party's over. They still think it's 1959.

The party's not over till you can't take your $25k Hawaii adventure with a copy of your hardcover, glossy, $15/copy report.

Why would you think the party's over? Their retirees may get a haircut -- but what evidence is there that the pension boards have been reformed?

I fully expect them to continue to behave as they were. After all, they took the 100% against the EFM/EM/bankruptcy path. See, they're doing a great job. Just ask them. So let's go get lei-ed.

[Honky Tonk]

The party's not over till you can't take your $25k Hawaii adventure with a copy of your hardcover, glossy, $15/copy report.

Why would you think the party's over? Their retirees may get a haircut -- but what evidence is there that the pension boards have been reformed?

I fully expect them to continue to behave as they were. After all, they took the 100% against the EFM/EM/bankruptcy path. See, they're doing a great job. Just ask them. So let's go get lei-ed.

Nice........ and you ARE right.

[Dumpling]

http://www.rscd.org/Intro_2012%20GRS...l%20Report.pdf

This should be the introductory section of the GRS 2012 Annual Report.
I am looking over this report prior to deciding how to vote on the Grand Bargain.
Supposing the GRS is very healthy the Grand Bargain does not need to take
the pensioners into account.

[corktownyuppie]

http://www.rscd.org/Intro_2012%20GRS...l%20Report.pdf

This should be the introductory section of the GRS 2012 Annual Report.
I am looking over this report prior to deciding how to vote on the Grand Bargain.
Supposing the GRS is very healthy the Grand Bargain does not need to take
the pensioners into account.

Will give you a headstart....

As of June 30, 2012 the actuarial accrued assets of the Retirement System totaled $2,806,489,202. The actuarial valuation as of June 30, 2012 reflects an unfunded actuarial accrued liability of $837,683,371. This is the difference between the net assets available for benefits and the actuarial liability calculated for the Retirement System. These “unfunded actuarial accrued liabilities” are being amortized over future years.

That puts the pension at 73% funding. [[837k/[[2806k+837k)). Which means the pension shortfall is 27%. In the past this shortfall could be made up by borrowing the funds to spread the shortfall out over several decades. But Detroit no longer has borrowing ability to do so.)

[Packman41]

http://www.rscd.org/Intro_2012%20GRS...l%20Report.pdf

This should be the introductory section of the GRS 2012 Annual Report.
I am looking over this report prior to deciding how to vote on the Grand Bargain.
Supposing the GRS is very healthy the Grand Bargain does not need to take
the pensioners into account.

Dumpling:

If your concern is that your fund is healthy or not then you need to read this too:
http://www.michigan.gov/documents/tr...7_406186_7.pdf

It is the Financial Report for the GRS for the year ending June 30, 2012 and should tie to the item you posted. I would ask you to take a look at the chart on the upper part of page 15 or 17/44 of the above pdf. This shows the Credit Rating Risk of the Debt [[Bond) Portfolio portion of the pension fund.

• Investment Grade: AAA is top rating and BBB are Low to Mid risk – 18.7% of the portfolio
• Non-Investment Grade: BB is non-investment and Below B is speculative – 15.2%
• Not Rated NR: Not traded on the open market, so unrated/questionable – 66.1%

So 81.3% of the bond portfolio is either below investment grade quality or so far off the grid that they cannot be rated. IMHO this is a high speculative mix of bonds and NOT appropriate for anyone’s retirement portfolio.

Meanwhile, on the link you posted you need to review a couple of pages:

Page 5 [[4/7): Notice the difference between the Target Asset Allocation and Actual Allocation for Alternative Investments. These are traditionally the riskier asset classes. The GRS has 33.1% of their money here when their target is a more reasonable 22.0%. They need to reduce this riskier class by 1/3 and move it into some safer asset classes.

Page 6 [[5/7) Who, exactly, on this page has the financial investment experience and training to truly manage a multi-billion dollar investment fund? Do you know their background? Can they hit the ground running? Are you confident that they [[or their replacements) know precisely what they are doing and won’t have to go to Hawaii for a training “seminar”?

Hope this gives you some guidance to do the right thing.

[corktownyuppie]

Dumpling:

If your concern is that your fund is healthy or not then you need to read this too:
http://www.michigan.gov/documents/tr...7_406186_7.pdf

It is the Financial Report for the GRS for the year ending June 30, 2012 and should tie to the item you posted. I would ask you to take a look at the chart on the upper part of page 15 or 17/44 of the above pdf. This shows the Credit Rating Risk of the Debt [[Stock) Portfolio portion of the pension fund.

I could be wrong, as I haven't looked deeply into it, but this is also my wheelhouse so take that for what it's worth.. Generally, "credit rating risk" and "debt portfolio" refers to fixed income and bond investments, not stock investments.

My bigger issue is with the assets listed on p. 7.

Equity interest in real estate accounts for $224 million.
Private placements account for $350 million.

These types of investments are not publicly traded, and, therefore, are impossible to value in a real-time basis. This does *not* make them bad investments, necessarily, but they are the types of investments which are very easily used to conceal fraud and graft.

[[For example, if you wanted to pay me a $20,000 kickback, one way to hide it would be pay me $70,000 cash for my $50,000 property. It eliminates shady exchanges of cash in dark alleys and what not.)

Given the fraud history of the pension trustees, it is very to hard to know whether or not this is an accurate appraisal of investments held.

=============

So in conclusion, when you combine:

[[1) the already clear 25%+ shortage in the pension fund,
[[2) the city's former practice and now inability to borrow money to cover the shortfall,
[[3) the suspension of the city funding the pension fund, and
[[4) over $570MM in assets whose valuations are questionable given the highly documented graft, bribery, and embezzlement problems....
[[5) the offer from the Grand Bargain to reduce your shortfall to 5% [[and the risk that losing in court means losing a quarter of your pension),

I'd say you should probably take the deal. That's just me, though, and everyone has to vote their conscience on it.

[Packman41]

I could be wrong, as I haven't looked deeply into it, but this is also my wheelhouse so take that for what it's worth.. Generally, "credit rating risk" and "debt portfolio" refers to fixed income and bond investments, not stock investments.

CTY, Of course you are correct. This is in my wheelhouse too and I mistakenly said stocks when I really meant bonds. Thanks for bringing this to my attention - I have corrected my original post so as not to confuse anyone else. This is important stuff and needs to be explained correctly.

To be clear, the bond portion of the investment portfolio is generally the safest, most risk adverse part of an overall investment strategy. So when I see that the VAST majority of the bond assets are non-invest grade or not ever rated for risk, then I would be VERY nervous.

Frankly, I don't even know where any reputable investment fiduciary would be able to find that many Non-Rated bond assets.

[Dumpling]

I appreciate everybody's input and comments, thanks everyone. One comment from
CTY was:

[[5) the offer from the Grand Bargain to reduce your shortfall to 5% [[and the risk that losing in court means losing a quarter of your pension),

so when I look over the mailing with the ballot I will look for if the shortfall is somehow
GUARANTEED to be 5% or less. If the pension system is as dicey as some comments
make it out to be then maybe in the future there will be a situation where pensions are
much less than they should be but with no legal recourse since we agreed...but I'm not
at that point; am still looking at the 2012 GRS report.

[Dumpling]

On page 20 there is a list of retirants and beneficiaries tabulated by year
of retirement. The real old folks have a monthly allowance that is stunningly
low.
There is 1 person for retiring in 1950 or before whose monthly allowance is a
MEASLY $341.
For the class of 1971-1975, the average monthly allowance is $587.
I think that inflation in the eighties outpaced the cost of living increases for
this set of retirees and there has been no subsequent special adjustment.
In contrast the highest average monthly allowance is for the 2012 retirees - there
are 406 in this class and it is $2,374.