FRANKLIN D. ROOSEVELT DO? - WHAT WOULD CLIMATE CHANGE INVESTING
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Autumn 2007
S t a t e Ass o c i a t i o n o f C o u n t y R e t i r e m e n t S y s t e m s | w w w . s a c r s . o r g
WHAT WOULD
FRANKLIN D. ROOSEVELT DO?
CLIMATE CHANGE INVESTING
HISTORY OF PUBLIC SECTORS
sAcrs autumn 2007
3 3 President’s message
5 messages
7 Legislative update: SacRS–Sponsored Legislation
featured guest:
9
climate change investing
7 14 meet your fellow SacRS members
16 History of Public Sectors
18 updates and announcements
8
stAtE AssocIAtIon oF countY rEtIrEmEnt sYstEms
alameda · contra costa · fresno · imperial · Kern · Los angeles
marin · mendocino · merced · orange · Sacramento
San Bernardino · San Diego · San Joaquin · San mateo
14 Santa Barbara · Sonoma · Stanislaus · tulare · ventura
strAtEgIc LocAL sAcrs EXEcutIVE BoArD commIttEE cHAIrs
goVErnmEnt sErVIcEs
Shawn terris, President clifton Wedington, Program Committee
1415 L Street, Suite 200 clifton Wedington, Vice–President Richard Stensrud, Legislative Committee
Sacramento, ca 95814
vicki crow, Treasurer Kathy foster, Vice Chair, Education Committee
t 916.441.1850 | f 916.441.6178
www.slgs.org Richard White, Secretary Rick Roberts, Affiliate Committee
casey Jones, Immediate Past President casey Jones, Nominating Committee
gregg Radamacher, Bylaws Committee
Donald Kendig, Audit Committee
2 s A c r s m A g A Z I n E a u t u m n 2 0 0 7 | w w w . s a c r s . o r g
President’s Message
What Would
Franklin D.
Roosevelt
Do?
Sha w n Te r r i s , S A CRS p r e s ide n t
D
uring the Great Depression Clearly, President Roosevelt had a vision
which ran from 1929-1941 and a solution. But he also had the leader-
when the nation’s economic life ship and commitment to make his vision be-
was in crisis, President Frank- come reality. That was, as they say, “history
lin D. Roosevelt created Social Security as in the making.”
part of the “New Deal”. The New Deal was
the title President Roosevelt gave to a series You Are History in the Making
of programs he initiated between 1933 and Yes, you! Everybody in SACRS is history in
1938 with the goal of providing relief, recov- the making. For those of you who are new in
ery, and reform to the people and economy of the public pension business, these are not or-
the United States. dinary times. They are quite extraordinary. So
take a few minutes to look 20 years down the
The Social Security Act was drafted by Presi- road to the year 2027, and then look back in
dent Roosevelt’s bi-partisan Committee on the rear view mirror. What do you see? What
Economic Security. The Committee was created legacy will you have left behind? Will it be the
in June 1934; they made recommendations to same or different than President Roosevelt’s?
Congress seven months later in January 1935;
and, the Social Security Act was signed into SACRS the Past 52 Years...
law seven months after that in August 1935. During its first 52 years, from 1954-2006,
That was a grand total of only fourteen months! SACRS was faced with a total of seven major
While Social Security was created to ensure eco- issues (averaging about one major issue every
nomic security for all Americans, it was contro- seven years):
versial when originally proposed. However, the
program has become one of the most successful 1977 Retirement Boards’ membership ex-
government programs in U.S. history. panded from 5 to 9 (GC 31520.1)
S A CRS M A G A Z I N E AUTUMN 2 0 0 7 | w w w . s a c r s . o r g 3
President’s Message
1984 Investment options expanded beyond fixed income (GC Orange County’s Retroactive Lawsuit. The Orange County Board
31594) of Supervisors has hired counsel with the intent to legally chal-
1992 Prop 162 (California Constitution; plenary and fidu- lenge the constitutionality of granting increased, retroactive
ciary responsibilities) benefits at the plan sponsor’s expense (as opposed to employees’
1999-02 Ventura Lawsuit (Compensation Earnable) expense). The outcome could affect all public retirement sys-
2000-02 Three consecutive years of market losses (only 3rd time in tems in California who administered retroactive benefits paid
US history) for by the plan sponsor, including CalPERS and CalSTRS.
2005 Richman Initiative I (Eliminate DB plans)
2006 GASB 43 and 45 (Retiree Health Care Liabilities) UC Berkeley/SACRS Pension Investment Course. SACRS col-
laborated with world renowned UC Berkeley’s Haas School of
…vs SACRS’ Issues in 2007 Business and created a world-class public pension investment
But, in the year 2007 alone, SACRS is facing seven major issues: management course. It debuted in July 2007 and a total of 60
professionals from around the country attended, including Trust-
Governor’s Commission. Governor Schwarzenegger created the bi- ees, Staff and Affiliates. The course will be held annually around
partisan Commission on Public Employee’s Post-Employment the June/July timeframe at UC Berkeley. This was SACRS Vice
Benefits in January 2007 (www.pebc.ca.gov). This Commission is President Wedington’s brainchild – from conception to gradua-
tasked with (a) Identifying the full amount of post-employment tion. Move over University of Pennsylvania’s Wharton School…
health care and dental benefits for which California governments you no longer have a monopoly!
are liable and which remain unfunded, and (b) Making recom-
mendations to the Governor by January 1, 2008 that addresses AB 246—Trustees who are Investment Managers. The Governor
unfunded pensions and retiree health care obligations. signed this punitive bill, which prevents 1937 Act Retirement
Board Trustees from selling or providing any investment prod-
Richman Initiative II. Former Assemblymember Richman is circu- uct, directly or indirectly, to any of the twenty 1937 Act systems.
lating a petition around the state which would mandate a substan- It becomes effective on January 1, 2008. This means that some of
tial reduction in the Defined Benefit retirement plans for newly our systems’ boards might lose valuable and free investment ex-
hired public servants. It would result in a reduction anywhere from pertise. This law does not apply to CalPERS, CalSTRS, UCRP
30-60% of current employees’ benefits. If it qualifies, it could be on nor any other public pension board trustees in California.
either California’s June or November 2008 voter ballot.
So, What Legacy Are You Going to Leave Behind?
SACRS Economic Impact Report (EIR). This report, released in These are defining moments in the 100+ year history of public
October 2007, determined that SACRS systems’ pensions have a pensions, not only in California, but across the United States.
$5 billion impact on California’s economy, supports about 35,000 What do you think President Franklin D. Roosevelt would do if
jobs throughout the state, and generates $350 million in new he were alive?
revenue for state and local governments. Each $1 invested by
employers yields a return of about $6 to California’s economy, As a responsible fiduciary, I hope
after being matched by employee contributions and investment you are sharing your expertise
returns. EIR reports were also generated for each of the 20 coun- and ideas with policy makers,
ty retirement systems’ and the impact they have on their own the taxpayers and your constitu-
county’s economy. ents. If you are new to this pro-
fession, I encourage you to ask
SACRS Historical Data. SACRS is trying to collect pension data questions and get the facts so
from 1990–2006 from the 20 systems. This data would complete you can become a resourceful
the summary section of the Economic Impact Report (EIR) for expert. Or, you can decide
each of those 20 systems and SACRS in totality. It would also to not partake in making
arm our membership with facts critical to effectively respond to history and just sit on the
public criticisms of public pension plans. sidelines. It’s up to you.
4 S A CRS M A G A Z I N E AUTUMN 2 0 0 7 | w w w . s a c r s . o r g
messageS
Past President’s Message
Ca s ey J o n e s , Ma r i n C o u n t y
SACRS has always looked for excellence Now you’re probably saying—Well it ’s
in leadership. At the November Confer- good for Casey to say these things, but I
ence in Palm Springs, we will be having a work hard, very tired at the end of the day,
session on discovering the future leadership and my boss won’t give me the time off to
of this organization. serve this organization.
I have always felt that giving back to the Just remember what that great President Wil-
community through service is one of the liam Jefferson Clinton said, “Ask not what
most fulfilling things one can do. Oh, I your country can do for you, ask what you
know, it’s easier to sit back, criticize the pro- can do for your country.” And please remem-
gram, the Executive Board, the venue, your ber that this Organization is only as good as
room, the drive or the flight. Well, here is the people who serve it, it’s your choice.
your chance to turn it all around. Maybe
this experience could turn your whole life See you Tuesday afternoon at the Leader-
around. No more wife or husband yelling ship Session.
at you, no more kids not obeying your every
Milbrey M. Jones
word, I mean respect. Yes, this could be the
start of a major life epiphany just by serving
on the SACRS Board. Past President and a SACRS faithful
BEST WISHES ON YOUR
RETIREMENT, DOROTHY!
SACRS congratulates Dorothy Sloter, RESDC President, on her retirement. Mrs.
Sloter has served as RESDC for 12 years and has been a valued member of SACRS.
"As I look back over the years during which I worked for San Diego County, I can reflect on
things that we accomplished during those years of public service, and each of you were very
important, whether you were in top management or clerical workers. Until we meet again,
D OROT H H Y S L OT E R
my best regards to you all, each and every one of you." P R E S I D E NT,
—Dorothy Sloter
R E T I R E D E M P LOY E E S O F
S A N D I E GO COUNT Y
S A CRS NON P RO F I T M E M B E R
Please read more about her in the December issue of the RESDC newsletter.
S A CRS M A G A Z I N E AUTUMN 2 0 0 7 | w w w . s a c r s . o r g 5
messageS
from the editor
S u le m a H . P e t e r s o n , S A CRS A d m i n i s t r a t o r
SACRS Fall Conference 2007 is just around American Red Cross Blood Source
the corner. The SACRS Program commit- www.redcross.org http://www.bloodsource.org
tee has done a fabulous job in preparing • Red Cross workers are distributing water • Blood Source has been asked to “back-
for your arrival in Indian Wells. We are ex- and food to firefighters and emergency fill” the blood supply of the Los An-
tremely honored to be hosting Lance Arm- workers in the affected areas. The Red geles area American Red Cross Blood
strong as our Keynote Speaker to kick off Cross continues to work with its part- Services and Blood Bank of the San
the Conference on Wednesday morning! ners and local authorities to respond to Bernardino and Riverside Counties
the needs of those affected by the fires. (BBSBRC) because regular donors are
I should be highlighting our Keynote dealing with fire related issues.
Speaker & emphasizing the educational • Your contribution means that they can
sessions planned for the 4 days of SACRS. continue to provide vital services during • Many ARC Blood Services and BB-
However, I just cant get there…My mind these times of need. SBRC personnel in Southern Cali-
is on our Southern California friends that fornia have been evacuated from their
are being affected by the firestorm raging California Volunteer’s homes and are unable to report to work,
thru six (6) SACRS counties; San Diego, http://www.californiavolunteers. therefore requiring the closure of some
San Bernardino, Orange County, Los An- org/disaster_prep.asp ARC and BBSBRC donor centers and
geles, Santa Barbara and Ventura. • Donations: If your business would like cancellation of some blood drives.
to make a donation to help the victims
Blistering fires are burning homes and of the Southern California fires please • Call to schedule an appointment
communities without discretion placing call: 1-800-750-2858. if possible, 1-866-82-BLOOD
many of our own volunteers in harms way. (1-866-822-5663).
The fires forced an estimated 320,000 peo- • Volunteer Opportunities: Be sure to find
ple to evacuate their homes as firefighters out where and when you will be needed, The SACRS community will continue to
struggled to keep pace with shifting winds how to dress appropriately and what keep our Southern California SACRS Staff,
and fast moving flames. According to me- supplies you will need to bring. This may Trustees & Affiliate Members and their
dia reports (at the time of print), at least include food, water and personal protec- Families in our thoughts and prayers…
16 wildfires have collectively scorched more tive equipment. Keep in mind that dur-
than 425 square miles of scrubland and res- ing a disaster first responders and disas- Be Safe,
Sulema
idential property. Low humidity and high ter relief organizations may be working
temperatures are expected to increase the at capacity and an unexpected arrival of
damage caused by the destructive fires. hundreds of volunteers may negatively
impact their relief and recovery efforts.
Here’s how you can make a difference:
LEgIsLAtIVE uPDate
sAcrs
LegiSLative RePoRt
faLL QuaRteR 2007
sAcrs-sPonsorED LEgIsLAtIon
Two of the three bills sponsored by SACRS in 2007 were signed into law by Governor
Arnold Schwarzenegger:
AB 1124/cHAPtEr 327, stAtutEs oF 2007 (KArnEttE – D-Long
BEAcH) oPEB cLEAn-uP—Assembly Member Betty Karnette authored the
SACRS OPEB legislation last year, AB 2863. This bill contains clean-up items
identified by counties as the embarked on implementation AB 2863. In addition,
J I m L I t E s , s c H o t t & L I t E s language was added to provide retirement systems with administrative spending
s A c r s L E g I s L At I V E A D V o c At E
cap relief for technology products and language specific to San Mateo County
authorizing the alternate retirement board members to participate in closed sessions
of the board.
AB 1288/cHAPtEr 331, stAtutEs oF 2007 (HAYAsHI – D-HAYwArD)
VIsIon cArE ProgrAm—AB 1288, authorizes SACRS Counties to offer a
Vision Care Program to retirees. The bill also authorized payroll deductions for
premium payments. Vision Care Program premiums will be paid by retirees who
elect to enroll. SACRS is currently seeking a third party administrator to manage
the program for those counties who choose to participate.
s A c r s m A g A Z I n E a u t u m n 2 0 0 7 | w w w . s a c r s . o r g 7
LEgIsLAtIVE uPDate
AB 1626 (gALgIAnI – D-mErcED) FEDErAL PEnsIon 2008 LEgIsLAtIVE ProPosALs
ProtEctIon Act—AB 1626, SACRS third sponsored
bill of 2007, contains language that provides a safe harbor for This fall, the SACRS Legislative Committee considered fifteen
counties to implement the federal Pension Protection Act until legislative proposals for the 2008 session. Among the proposals
further direction from the IRS is provided related to eligible being recommended for introduction by the Committee
safety classifications for the new federal tax deduction and include a bill to establish reciprocity between the 1937 Act
normal retirement age. At the suggestion of outside tax counsel Systems and the University of California Retirement System;
for several 1937 Act systems, SACRS has held AB 1626 for a clarification of distributions for the Los Angeles and Santa
2007, in favor of joining with safety groups to seek regulatory Barbara non-contributory plans in the event of an in-service
or statutory clarifications at the federal level. This bill will be death or termination; and a broad technical clean-up measure.
available to SACRS in the 2008 legislative session for use for All proposals will be considered by the full body of SACRS in
other proposals. November and those approved will be pursued in 2008.
BILLs ImPActIng 1937 Act countIEs PuBLIc EmPLoYEE Post-EmPLoYmEnt BEnEFIt
commIssIon uPDAtE
AB 246/cHAPtEr 315, stAtutEs oF 2007
(torrIco – D FrEmont) 1937 Act trustEE The PEBC or OPEB Commission is entering its final stages of
mArKEtIng ProHIBItIon. activity. The Commission continues to have an active meeting
This measure was signed into law and contains language schedule as they prepare to generate recommendations for their
prohibiting a 1937 Act Trustee who is a financial services final report due on December 31. Three broad concepts to frame
professional from marketing his or her company’s products the final recommendations have been outlined that tie back to
and services to the other 19 systems. SACRS was opposed the Executive Order that created the Commission:
unless amended and suggested a series of additional disclosures,
fiduciary training and fundraising limitations on trustees. These Competitive, affordable benefits packages serve the public
suggested amendments were not accepted and SACRS submitted well by enabling recruitment and retention of qualified
a letter requesting it be vetoed. public employees.
AB 753/cHAPtEr 320, stAtutEs oF 2007 The costs of benefits should be fully identified and the
(HErnAnDEZ – D wEst coVInA)—comPEnsAtIon benefit funding process should be clear, easily understood
For DIsABILItY cAsEs. and actuarially sound.
This bill was signed into law and was sponsored by LACERA. It
allows the Los Angeles County Board of Supervisors to provide The benefit adoption, modification and financing process
compensation to board of retirement members for reviewing should be open, transparent and defensible in order to build
disability retirement cases. The bill also allows the alternate public awareness, trust and support.
safety member to sit and vote on the retirement board if the
retired member and alternate retired member are absent from a
‘37 Act county board of retirement meeting – this element of the
bill was added at the request of the Firefighters.
FEAturED gueSt
cLImAtE cHAngE
inveSting
Jo Hn c. mAXw E L L , I I I
mAnAgIng DIrE cto r
PA r K E r g Lo B A L s t r At E g I E s , L L c
EXEcutIVE summArY
We live in a resource-constrained world. Climate change reduces our natural resources;
but, fortunately, it also creates investment opportunities. These range from cleantech to
master limited partnerships (MLPs) of energy infrastructure.
Mr. Maxwell is Chairman of the tHE PErFEct storm
Portfolio Committee and sits on A “perfect storm” is developing for investments in infrastructure, clean technology and
the Investment Committee. He renewable energy. These are among the most promising growth opportunities of the
studied at Wesleyan University
21st century. The new energy market includes the traditional energy markets with the
and Harvard, has served on
several boards of Fortune 500 addition of alternative energy, water and advanced materials. 2006 marked a “tipping
technology firms, appeared on point” in global awareness of climate change, natural resource supply/demand imbal-
CNN and MSNBC and has been ance and associated security risks. Global awareness translated into action at the local
widely quoted by the Wall Street level. Governments have imposed stricter regulations on traditional fossil fuels and cre-
Journal, Forbes, Fortune and ated more favorable legislative action, including tax incentives, for alternative sources
Business Week.
of energy. These structural changes are a reaction to the realization that we live in
s A c r s m A g A Z I n E a u t u m n 2 0 0 7 | w w w . s a c r s . o r g 9
Featured Guest
a world of constrained natural resources Sustainability the energy markets in reaching the goal
threatened by a changing climate. Inves- The New Energy Market is being created of reducing greenhouse gas emissions.
tors may react with a portfolio of energy by multiple and disruptive forces. Un- These emissions cannot be reduced suf-
and environmentally-related issues, or E2 like previous markets driven by enabling ficiently through advances in fossil fuels,
as pictured below. technologies like the internet, structural nuclear, renewable or energy intensity
changes within global energy and natural alone. These factors suggest that this
Multi-national corporations, public and resources are being supported by forces is not a boom-bust story, but rather an
private companies, investment banks and which will take decades to play out. Leg- extended investment cycle characterized
venture capitalists all understand the im- islative action, globalization, and new de- by multiple opportunities.
portance of climate change as it relates velopments in the capital markets drive
to capital markets. Climate change will this trend and give it legs. Viable, cost- Globalization
materially affect the access to capital competitive, clean and green alternative Rapid economic expansion is heighten-
as greater disclosure of climate change power sources sustain this revolution. ing the need for greater global access to
risks is required. Environmental costs energy markets. Developing countries like
and monetary supports are also chang- The energy markets are now the net China and India have strained supplies
ing the economics of the energy industry. beneficiaries of new technologies as in- not only of oil, but also of other scarce re-
New technologies are creating alterna- novations have emerged from various sources including water, copper, coal, zinc
tive solutions that will compete with and areas such as the nano-technology and and other minerals. The staggering de-
eventually surpass traditional energy pric- bio-technology markets. Established mand for commodities has created scarci-
ing. Investments in energy infrastructure, companies are even beginning to re-pur- ty and increased prices. While the surge in
cleantech and alternative energy between pose older technologies for use in new commodity prices has tempered demand
2006 and 2012 are crucial to filling the markets such as energy-efficient materi- somewhat in the near term, pressure on
supply gap, and will determine the future als or the power grid. These disruptive natural resources is projected to remain a
of global energy use. technologies have the promise of aiding long term issue for the foreseeable future.
WATER
Alt Energy Purification, quality and process/use
Wind, Solar, Bio-Fuels, improvements
Bio-mass, Clean Tech
ENERGY MATERIALS
Waste reduction,
Energy generation and sustainable processes,
distribution, process and improved efficiencies,
product efficiencies, energy advanced materials and
services nano-technology
10 S A CRS M A G A Z I N E AUTUMN 2 0 0 7 | w w w . s a c r s . o r gGlobalization
US, China, India,
Policy Brazil, Russia, EU...
Clean Air /
Water Acts,
Kyoto, Energy
Policy Act,
Renewable
Portfolio
Standards… Convergence
Clean & in the US alone, meeting the MLP’s are emerging as a distinct asset
Green necessary demand requires class, akin to the emergence in the 1990s
Coal, gas, building over 450 power of real estate investment trusts (REITs).
nuclear,
geothermal, plants at a cost of $430 bil- This is evident in the growth exhibited by
Capital Markets biomass, lion by 2025. MLP’s over the past ten years in terms of
Environmental T&D, wind,
Commodities, VC, solar… number, size and liquidity. In 1994, there
Private Equity, Project The lack of production and were just seven energy MLP’s with an ag-
Finance…
processing facilities for gregate market capitalization of approxi-
crude oil has become a ma- mately $2.1 billion. Currently, there are
Whether in oil production or in mining, a jor supply constraint. Oil demand is pro- 60 energy MLP’s with a total aggregate
dearth of capital expenditure on infrastruc- jected to outstrip supply at some point market cap of about $125 billion. Returns
ture during the 1980’s and 1990’s has left between 2010 and 2015. Without debat- are driven by a combination of earnings
existing plants, production facilities and ing “peak oil” theory, the exploration for growth (6-8%) and yield (which currently
mines rundown and insufficiently posi- oil has dropped consistently since the averages 5.50%).
tioned to support growing demand. As the peak reached in the 1960’s.
world continues to shrink, and countries Water
have become increasingly interdependent, Master Limited Partnerships (MLP’s) are Water is the world’s third largest indus-
pressures to maintain access to requisite an interesting way to play the growth in try. Water is a $365 billion global mar-
resources have greatly increased economic US capital expenditures on infrastructure ket which is exceeded only by oil and
and political risk. for oil, gas, propane and exploration. An electricity. By 2025 there will be an ad-
MLP is a publicly traded partnership that ditional 3 billion people on the planet
Infrastructure— has the liquidity of a publicly traded com- who will require 20% more water than
Aging and New pany. Ninety percent of its income must is currently available. North America has
The International Energy Agency esti- derive from the transportation, storage or 8% of the population with 15% of water
mates that worldwide energy supply in- processing of natural resources (or their supply; China, on the other hand, has
frastructure investment between 2005 and by-products) such as crude oil, fertilizer, 21% of the population with only 7% of
2030 will be at a staggering $20 trillion. minerals, paper, coal, or natural gas. the water supply.
For the developed countries, investment
is required to upgrade our aging and di-
lapidated power plants and water infra-
structure. The investment challenge for
developing countries is to build basic in-
frastructure that will provide broad access
to electricity, clean water and other neces-
sities. In North America, capital invest-
ment needs are projected at $3 trillion and,
S A CRS M A G A Z I N E AUTUMN 2 0 0 7 | w w w . s a c r s . o r g 11Featured Guest
Water is the next scarce resource and will products and services that 1) optimize the solar companies in 2006 surged to multi-
be the “blue gold” of the 21st century. In use of natural resources, while 2) reducing billion market capitalizations. The un-
the US alone, water investment needs are ecological impact and 3) adding economic precedented surge in merger and acquisi-
estimated at over $600 billion to repair and value by significantly lowering costs and tion activity in the utility industry drove
upgrade aging infrastructure. That figure improving profitability. There are two the US M&A indices up 25% and similar
includes $250 billion for drinking water types of cleantech: those that seek lower European indices up 51%.
and $350 billion for waste water upgrades. carbon emission (i.e. wind, solar) and
those that seek to replace and improve Four markets make up clean energy: so-
Meanwhile, developing countries in Asia, energy efficiency, recovery and cleanliness lar, wind, biofuels, and fuel cells. In 2006
Africa and Latin America lack adequate (grid management, water treatment, gas- these markets accounted for $55 billion in
access to clean water and need to build ification). The cleantech sector is a far cry annual revenues which was a 39% year-
their infrastructure from scratch. China from the environmental technology of the over-year increase. In less than 10 years,
alone needs to build water infrastructure 1970s-1980s; it is more like biotech as an annual revenues are projected to surge to
on such a scale as to require a capital ex- investment theme, although emerging at $266 billion.
penditure growth rate of 20% for the next twice the pace.
5 years. Financial markets, led by private equi-
There are no silver bullets in a natural- ty, venture capital and hedge funds, are
Policy makers worldwide are pursuing resource constrained world. There is no pushing the development of alternative
clean air and water acts, including the magic that will fill the gap between the technologies. They deploy capital for the
Kyoto Protocol and Energy Policy Act. demand for energy coming from devel- outpouring of research and development.
In the US the “Pelosi Bill” will take some oped and emerging markets and supply Venture capital investment in US energy
of the $14 billion energy incentives away constraints of the traditional energy com- technology start-ups increased from $917
from traditional energy to create incen- plex. It will take a portfolio of solutions million in 2005 to over $2.4 billion in
tives for new energy industries and clean- in order to meet these energy demands 2006 and represented 9.4% of total ven-
tech companies. The goal will be to pursue and those of industrializing countries like ture capital investments. There is already
and implement cleaner energy solutions. China and India while simultaneously re- a great deal of consolidation across the
Heightened consumer awareness, togeth- ducing C02 emissions. many industry segments because there
er with more stringent industry codes and is a growing need for scale, global access
regulatory requirements, increased the Capital Markets and synergy within the energy sectors.
demand for clean technologies and more To see the interest in these new oppor-
efficient conservation. We are pursuing tunities, investors need only look at the One misconception about alternative
multiple goals of cleaner energy and air, growth in venture capital pouring into energy companies is that they are sim-
purer water and healthier food. multi-billion dollar infrastructure funds ply a derivative of the high price of oil.
such as Carlyle Group and Goldman While there are some companies that are
Alternative Energy Sachs. Total capital raised for investment correlated with the price of oil; many are
and Cleantech in infrastructure and alternative energy also tied to the technology, natural gas,
Cleantech embraces knowledge-based now exceeds $100 billion. Valuations of or metals markets. Indeed, like most in-
12 S A CRS M A G A Z I N E AUTUMN 2 0 0 7 | w w w . s a c r s . o r gdustries, the fate of alternative energy is Summary the markets. 4) Investors wishing to play
tied to such global economic factors such From all of this follows that five clear in- this market need to allocate capital to
as GDP growth, interest rates and com- vestment trends relating to climate change both public and private investment strat-
modity prices. have emerged. 1) The global restructuring egies. Many compelling companies will
of the energy complex will take years to not go public; some will be acquired by
In fact, January 2007 was the first month accomplish. Unlike the dot.com era, there large multi-nationals while other smaller
where alternative energy companies sig- are sustainability factors within the sec- companies will combine to gain scale. 5)
nificantly decoupled from oil prices – tor including $20 trillion of infrastruc- Mergers and acquisitions will play an im-
crude fell 7% while the Powershares Wil- ture spending. 2) Technology will be a portant role in driving opportunities.
derhill Clean Energy Index was up 2% key driver. 3) Thematic investing will give
during the month. way to more informed investing whereby Climate change offers a sustainable
markets and companies will be differenti- investment theme with a broad range of
Connected to the misconception about ated by valuation. Volatility will then enter opportunities.
alternative energy’s correlation with oil is
the question about the longevity of invest- Disclaimer
ment opportunities in alternative energy. This material is based on data obtained from sources we deem to be reliable; it is not guaranteed
Even without expounding on the “peak- as to accuracy and does not purport to be complete. This information is not intended to be used as
the primary basis of investment decisions. Because of individual client requirements, it should not
oil” theory, it is certain that there is a finite
be construed as advice designed to meet the particular investment needs of any investor. It is not a
amount of oil, natural gas and coal offset representation by us or an offer, or the solicitation of an offer, to buy or sell any security.
by viable and cost-competitive sources of
alternative energy. Copyright 2007, Parker Global Strategies. Additional information is available upon request.
www.parkerglobal.com • info@parkerglobal.com
S A CRS M A G A Z I N E AUTUMN 2 0 0 7 | w w w . s a c r s . o r g 13mEEt Your FELLow SacRS memBeRS
stAFF, trustEEs & AFFILIAtEs...our succEss
AsHLEY K. Dunning
P A r t n E r , s t E E F E L , L E V I t t & w E I s s
c o - c H A I r , L I t I g At I o n g r o u P
M
s. Dunning is a civil litigator and resented the Alameda County Employees’ Retirement
fiduciary advisor, with substantial Association, California Public Employees’ Retirement
expertise representing pension fund System, California State Teachers’ Retirement System,
trustees, public and private entities, Los Angeles City Employees’ Retirement System, Los
and nonprofit organizations in resolving complex dis- Angeles County Employees’ Retirement Association
putes and advising on issues involving fiduciary ob- and San Bernardino County Employees’ Retirement
ligations, the California Constitution, Article XVI, Association as amicus curiae in the state criminal con-
Section 17, the County Employees' Retirement Law flict of interest case against several former trustees of
of 1937, the Political Reform Act, California’s conflict the San Diego City Employees’ Retirement System.
of interest laws, the Brown Act, the Public Records
Act, and the Prudent Investor Act. She appears regu- Ms. Dunning has presented to the General Assem-
larly before boards of trustees and in court proceed- bly of the National Association of Public Pension
ings throughout California on these issues. Attorneys (NAPPA), the General Assembly of the
California Association of Public Retirement Systems
Ms. Dunning is presently serving as general, litiga- (CALAPRS), the CALAPRS Trustees and Attorneys
tion, fiduciary, coverage and investment counsel for Roundtables and the State Association of County Re-
numerous public retirement systems in California. tirement Systems (SACRS) on various issues regard-
ing public pension law. She also has published sev-
Some of Ms. Dunning's more well-known pension eral articles in the Pension Journal regarding public
fund cases include prosecuting the Orange County pension-related issues, including most recently, “Hon-
Employees’ Retirement System’s successful resolution est Services Fraud: What’s the Issue for Retirement
of the statewide litigation arising out of the applica- Board Members?”, “Illinois Sudan Divestment Statute
tion of the California Supreme Court's 1997 Ventura Fails to Pass Constitutional Muster,” and “Court Af-
decision, which resulted in the published decision, In firms County’s Authority to Exclude Returning and
re Retirement Cases (2003) 110 Cal. App. 4th 426. Redepositing Members From Retroactive Application
More recently, Ms. Dunning successfully resolved of Newly-Enacted Enhanced Benefit Formulas.”
after trial the “excess earnings” class action litigation
brought against the Ventura County Employees’ Re- Ms. Dunning received her B.A. from Yale University
tirement Association. Ms. Dunning also has resolved (cum laude) with a Distinction in History, and then
by demurrer numerous cases brought against the Con- was selected for a position through the City of New
tra Costa County Employees’ Retirement System, York as an Urban Fellow. Ms. Dunning received her
one challenging CCCERA's use of excess investment J.D. from the University of California at Hastings
earnings, another challenging CCCERA's Board's (cum laude) where she received three Jurisprudence
determination of the contribution amount a district Awards and was Order of the Coif. While at Hastings,
owed to the retirement system, and several others she was a member of the International & Comparative
challenging the retirement system’s determination of a Law Review, Thurston Honor Society, and La Raza
member’s benefits due. In addition, Ms. Dunning rep- Legal Defense Fund. Ms. Dunning lives in Oakland.
14 s A c r s m A g A Z I n E a u t u m n 2 0 0 7 | w w w . s a c r s . o r gDIAnA RuiZ
s A c r A m E n t o c o u n t Y
D
iana Ruiz is a Deputy has been with the Office of the County Diana earned her B.A. degree in English
County Counsel for the Counsel since 1997, handling a variety from San Francisco State University and
County of Sacramento. of administrative and court proceed- her J.D. degree from University of Cali-
She has represented the ings. Prior to her employment with fornia, Hastings College of the Law. She
Sacramento County Employees’ Re- Sacramento County, she had her own keeps her love of literature alive by lis-
tirement System in contested disabil- law practice in Stockton, where she re- tening to audio books on her commute
ity retirement matters since 2002. She sides, for 12 years. from Stockton to Sacramento.
JuLIE Wyne
I n t E r I m c H I E F E X E c u t I V E o F F I c E r ,
o r A n g E c o u n t Y E m P L o Y E E s r E t I r E m E n t s Y s t E m
T
he Board of Retirement ap- OCERS to ensure OCERS’ legislative came from a donated egg and sperm.
pointed me to serve as Inter- needs are being met. The egg, coincidentally, came from my
im Chief Executive Officer almost 4 year old’s birthmother. Two
of OCERS effective May Before working for OCERS, I was an months after I gave birth to my two year
22, 2007. I am also General Counsel and Attorney/Partner with Shupe, Reagan old, I became pregnant, much to every-
Government Affairs Officer. I serve on & Wyne in Santa Ana, CA, a litigation one’s amazement, including my fertility
the Legislative Committee for SACRS law firm representing insurance compa- doctor. So, I have a genetic child, an in-
and on the Mentor Committee for the nies and their clients. Finding that the vitro child from donated egg/sperm and
National Association of Public Pen- grind of daily billing and client develop- an adopted child. My kids come from all
sion Attorneys. I was hired by OCERS ment did not suit me, I applied for the methods and couldn’t be more loved.
in August of 2000 to conduct admin- job at OCERS.
istrative hearings and was promoted to I have a Bachelor’s of Science in Laws
General Counsel in August of 2002. As I have three children, ages 1, 2 and al- and a Juris Doctorate from Western
General Counsel I advise the Board and most 4 and a wonderful husband of 15 State University, Fullerton, California.
staff on the administration of the system years. My almost 4 year old was adopted I am an avid hiker and love to go to
and oversee the internal legal staff and because my husband and I went through Yosemite...which I never get to do any-
external counsel. As Government Affairs several in-vitro procedures only to find more because of the little kids. So, these
Officer I follow state and federal legis- out we couldn’t have our own children. days, my husband and I do our hiking at
lation and liaison with stakeholders of My 2 year old was implanted in me but Disneyland, which ain’t all that bad.
s A c r s m A g A Z I n E a u t u m n 2 0 0 7 | w w w . s a c r s . o r g 15sEcrEtArY's meSSage
HiStoRy of
PuBLIc sEctors rIcHArD wHItE
oc Ers
sAcrs s E c r E tA rY
In June, 2007 the State Association of County Retirement Systems (SACRS) partnered
with the UC Berkeley Haas School of Business for an intensive three-day course in public
pension fund investment and management which I was fortunate enough to be able to
attend. The course was taught by facility members and was held at the business school on
the northern California campus.
One of the introductory sessions contained a small segment on the history of pension benefits
and how they were developed in the private and the public sector. I found the historical
information interesting and very relevant to some of the issues we all are currently facing
with certain types, so as a matter of perspective I thought I would share some of what I
learned about when and why pension funds exist.
16 s A c r s m A g A Z I n E a u t u m n 2 0 0 7 | w w w . s a c r s . o r gsEcrEtArY's meSSage
PrIor to 1940, most PEnsIon have become increasingly recognized as an one only pays limited attention to the media
AssEts wErE EItHEr A PAY-As- important part of our societal moral and so- or other sources of information it would be
cial obligation to provide some level of fi- difficult to get a balanced view of the DB vs.
You-go oBLIgAtIon oF tHE
nancial support for retirees. DC debate.
PLAn sPonsor or InsurAncE
comPAnY It is also very important to note that pen- One tidbit of information that I saw in
1812: Servicemen’s Pensions, which was the sion benefits are considered to be a form of a recent publication seems from my per-
first U.S. Pension Plan designed for veterans “deferred compensation” for employees. Tax spective to caution against the use of a
of the War of 1812. code changes imposed upon employers dur- defined contribution (DC) plan as the
ing the war effort and restrictions on the PRIMARY vehicle for retirement income.
1875: The first United States private pen-
amount of wages that could be paid to em- The chance of running out of money dur-
sion plan was established by The American
ployees during this time period gave advan- ing their lifespan is a significant downside
Express Company.
tage and motivation for employers to estab- risk for retirees who depend upon defined
1900: The Pattern Makers League of North lished pension plans for their employees. contribution plans as a retirement income
America established the first United States vehicle. The article said:
labor union pension plan. Much of the current statewide and local de-
1911: Missouri and Illinois began the first pub- bate about pension benefits is focused on the “Fifty-seven percent of adult U.S. work-
lic employee pension plan for state workers. cost of pension benefits but the context of how ers have saved less than $100,000 for re-
and why pension benefits expanded to their tirement, while 28% have saved less than
1920: The first Federal Government employ-
use as “deferred compensation” by employers $10,000, according to a survey released
ee pension plan began with the establishment
is still applicable today – yet somewhat lost by [December 14, 2006] by the Commission
of the Civil Service retirement system.
public pension benefit antagonists. on the Regulation of U.S. Capital Mar-
kets in the 21st Century. The survey also
tHE Post-DEPrEssIon ErA sAw I would encourage everyone associated with our said 29% of working adults think they will
An IncrEAsE In LEgIsLAtIon to twenty county systems, trustees and staff to en- not have enough money to maintain their
ProVIDE For Post-EmPLoYmEnt hance your fiduciary skills by attending the next standard of living during retirement, ac-
BEnEFIts session of the SACRS–UC Berkeley Public Pen- cording to a news release announcing the
sion Investment Management Program! survey results.” (Source: P&I Daily, De-
1935: The Social Security Act and the Rail- cember 14, 2006).
road Retirement Act were established.
DEFInED BEnEFIt VErsus
1935: The National Labor Relations Act DEFInED contrIButIon PLAns BEHInD tHE orAngE curtAIn
was passed. This act established pensions as One important area where the Governor’s At the time of the writing of this article,
a form of remuneration and as legal obliga- Commission will weigh in will be the debate the Orange County ERS is progressing with
tions of the employer to fund and pay. over the use of defined benefit pension plans the search for a new Chief Executive Of-
as the vehicle for providing a retirement in- ficer (CEO) that was made necessary when
worLD wAr II ErA come for public sector employees. our previous CEO Keith Bozarth moved to
The war effort caused numerous changes in the a much larger state system in the Midwest.
way that businesses operated. The war effort The debate is even more intriguing with the The search committee expects to interview a
mandated wage freezes on employees, increased entrance of yet another initiative by Keith short-list of highly qualified candidates for
taxes on excess corporate profits and granted Richman’s group to alter the structure and the position in the middle of October and
tax relief for corporations that had pension to significantly lower benefit levels of pub- will hopefully recommend one or two of
funds for their employees. The result was that lic sector pension benefits in California. these candidates to the full Board of Retire-
businesses expanded their use of pension ben- This pension initiative was recently quali- ment for further interviews prior to a selec-
efits because the wage freezes prohibited out- fied for circulation by the Secretary of State tion of our new CEO.
right increases in workers’ pay. The companies and means that Richman will need to gather
were able to take advantage of favorable tax nearly 700,000 qualifying signatures by Jan- sAcrs BoArD oF DIrEctors
laws that benefited their bottom line. The re- uary 10, 2008 to get the initiative in front of It has been an on-going privilege to serve
sult was that companies significantly increased the electorate. on the Board of Directors and I thank all of
the use of pension benefits as a form of “de- you for the support that has been offered up
ferred compensation” for employees! Rarely a publication that deals with pension to me along the way. I appreciate it and look
issues is published without some article or forward to continued positive accomplish-
Pension benefits for employees have been mention of the variances between defined ments with this fine organization. See you
around for well over one hundred years and benefit and defined contribution plans. If at Indian Wells!
s A c r s m A g A Z I n E a u t u m n 2 0 0 7 | w w w . s a c r s . o r g 17uPDAtEs AND
ANNOUNCEMENTS
sAVE tHE DAtE!
General Manager
Los Angeles City Employees’ Retirement System
gEnErAL mAnAgEr sEArcH
sAcrs SPRING http://www.lacers.org/
Los Angeles City Employees’ Retirement System
CONFERENCE 2008 http://www.lacers.org/
MAY 13—16, 2008 Established in 1937, the Los Angeles City Employees' Retirement System
SHERATON GRAND HOTEL Establishedprovides
(LACERS)
insurance
in 1937,service
the Los
subsidiesprovides
to over 44,000
Angeles City
retirements,
active
Employees’
disability Retirement
retirements,
and retireddisability
members and
Sys-
and health
their families.
tem (LACERS) service retirements, retirements, and
SACRAMENTO, CA The General Manager reports to a seven-member Board of Administration
health insurance subsidies to over 44,000 active and retired
comprised of elected and appointed members, and manages a staff of 139 andmembers and
their
net families.
assets of over $11.8 billion.
Online Conference Registration begins February 1, 2008
The ideal candidate will be an accomplished leader with significant management
At www.sacrs.org experience, excellent political skills, professional presence and maturity, strong
Registration packets will be mailed at that time as well. The General
people Managermanagement
and process reports to a seven-member Board ofknowledge
skills, sound working Administration
and
comprised of of
understanding elected and appointed
institutional members,
investments, and the and manages
highest level ofaintegrity
staff ofand
139
ethics. Public pension leadership experience and an advanced degree are
HoteL infoRmation: and net assets of over $11.8 billion.
preferred.
Sheraton Grand Hotel
1230 J Street LACERS is a reciprocal agency with the California Public Employees’ Retirement
The ideal
System candidate
(CalPERS) andwill be anCalifornia
37 other accomplished leader with
public pension funds.significant man-
Sacramento, CA 95814
agement experience, excellent political skills, professional presence and
916-447-1700
maturity, strongForpeople and process
information, management
or to apply, skills, sound working
please contact:
Reservations: 1-800-325-3535
knowledge and understanding of institutional investments, and the high-
Rates: $189 (state and local tax not included) Mary L. Hobson, Executive Vice President & Managing Director
est level of integrity and ethics. Public pension leadership experience and
Parking: Valet $ 21 – Self $ 13 mhobson@eflassociates.com
an advanced degree are preferred.
Room Block Opens: February 1, 2008 Brittney K. Schroeder, Associate
bschroeder@eflassociates.com
oveRfLoW HoteL infoRmation: LACERS is a reciprocal agency with the California Public Employees’ Re-
Hyatt Regency Sacramento at Capitol Park tirement System (CalPERS) and 37 other California public pension funds.
1209 L Street
Sacramento, CA 95814 Greenwood Village, CO 80111
916-443-1234 For information, or to apply, please
Phone: contact:
303-779-1724
Reservations:
Rates: $199 (State and local tax not included)
Parking: Valet $25 - Self $17 Mary L. Hobson, Executive Vice President & Managing Director
Room Block Opens: February 1, 2008 mhobson@eflassociates.com
Brittney K. Schroeder, Associate
bschroeder@eflassociates.com
18 s A c r s m A g A Z I n E a u t u m n 2 0 0 7 | w w w . s a c r s . o r gMODERN INVESTMENT
THEORY AND PRACTICE FOR
RETIREMENT SYSTEMS
sAcrs PUBLIC PENSION
INVESTMENT MANAGEMENT
PROGRAM 2008
June 23–25, 2008 | RegiStRation BeginS JanuaRy 1, 2008
uc BeRKeLey, HaaS ScHooL of BuSineSS
cLaRemont ReSoRt anD SPa | BeRKeLey, caLifoRnia
Registration materials will be mailed in December and online registration
will begin January 1, 2008. class size is limited to one session.SACRS Conference Schedule 2007–2012
FALL 2007 SPRING 2009 FALL 2010 SPRING 2012
November 13-16 May 12-15 November 9-12 May 7-11
Renaissance Esmeralda Hyatt Regency Sheraton Universal TBD
Indian Wells, CA Embarcadero Center Universal City, CA
San Francisco, CA FALL 2012
SPRING 2008 SPRING 2011 November 12-16
May 13-16 FALL 2009 May 10-13 TBD
Sheraton Grand Hotel November 10-13 Fess Parker’s
Sacramento, CA The Westin Doubletree Resort
South Coast Plaza Santa Barbara, CA
FALL 2008 Costa Mesa, CA
November 11-14 FALL 2011
The Westin SPRING 2010 November 8-11
South Coast Plaza May 10-14 The Westin
Costa Mesa, CA Marriott Newport Beach South Coast Plaza
Hotel & Spa Costa Mesa, CA
Newport Beach, CA
Join us at our Fall Conference
November 13—16 | Renaissance Esmeralda
Strategic Local Government Services First Class
U.S. Postage
1415 L Street, Suite 200
Sacramento, CA 95814 PAID
(916) 441–1850 Permit No. 185
Sacramento, CAYou can also read
