Over a year-long process known as the Asset Liability Management (ALM) process, CalPERS reviewed investment portfolio options, including the discount rate - the target rate of return for investment portfolios - and the factors that go into this significant decision. RCRC and CSAC hosted a webinar on September 23, 2021, presenting counties with an update and the opportunity to discuss the discount rate with the CalPERS Deputy Chief Actuary before the Board’s final decision was slated to be made in November.
The CalPERS Board narrowed down the potential discount rates to 6.5, 6.8, and 7.0% and evaluated various options for investment portfolios that can produce those expected returns. The final selection was voted on at the November 15 meeting. The CalPERS Board of Administration selected portfolio B2, which sets the discount rate at 6.8% with a 5% leverage. RCRC has been engaged throughout the year-long process and provided testimony at the November 15 meeting, emphasizing the importance of predictability and stabilized contributions for counties. A lower level of volatility helps our counties better plan for the future. The new asset allocation takes effect on July 1, 2022. For more information regarding this decision, visit CalPERS News (CalPERS Board Selects New Asset Allocation for Investment Portfolio, Keeps Discount Rate at 6.8% - CalPERS).