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Nation's largest public pension fund approves shift to less-risky investments, lower returns


SACRAMENTO, California — The board that oversees the nation's largest public pension fund voted Wednesday to incrementally reduce its investments in risky funds as a cushion against economic downturns, following other pension systems that have taken similar action.

The move by the California Public Employees' Retirement System will gradually lower the expected rate of return to 6.5 percent, over a 21-year period, from the current 7.5 percent.

The body said the change would help it pay down unfunded liability and provide greater predictability in employer contribution rates.

"Ensuring the long-term sustainability of the fund is a priority for everyone on this board, and this policy helps do that," Rob Feckner, president of the CalPERS board, said in a statement.

Gov. Jerry Brown, however, said that the approach will still expose the fund to unacceptable risks because of the long timeline. He had advocated a plan that would have slashed the rate in just five years, the Sacramento Bee ( ) reported.

"I am deeply disappointed that the CalPERS Board reversed course and adopted an irresponsible plan that will only keep the system dependent on unrealistic investment returns," Brown said in a statement.

State and local governments as well as workers could be on the hook to make up the difference in returns if the CalPERS fund does not earn enough. The changes approved Wednesday were supported by public employee labor unions that do not want to stress employers, the Bee reported.

The nearly $300 billion system far exceeded projections in 2014, posting an overall 18.4 percent return on investments last year. The bullish stock market helped boost its funding level to 77 percent at the end of last fiscal year.

CalPERS officials said the new approach will stabilize the fund and eventually make CalPERS "fully funded," the Bee reported.

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