A Bloomberg article recently published in many Florida outlets used broad generalities, gross overstatements and outdated information to report on the Florida Retirement System (FRS) pension fund.
This story created unnecessary anxiety, particularly for state employees and retirees with retirement monies invested in the fund. A clarification is in order.
None of the FRS's investments have assets backed by subprime mortgages. Any mortgage-backed assets held by the fund are supported by collateral consisting of prime and near-prime mortgages. Of the approximate $138 billion fund value, only $756 million, or half of 1 percent, consists of lower-grade investments. Even if these investments were sold at a loss - which is highly unlikely - they would have minimal impact on the fund's overall profitability and rate of return.
Additionally, the article compared the FRS's portfolio with a short-term investment pool that recently experienced heavy withdrawals. This comparison is impossible because the FRS is a long-term portfolio and its holdings include at-risk assets specifically intended for the structured diversification which the State Board of Administration (SBA) has a fiduciary responsibility to provide. The SBA is charged with maintaining the security of pension funds and Florida's pension fund is currently rated the highest performing fund in the nation.
The Bloomberg article created a profoundly negative psychological effect among state employees and retirees who believe their retirement monies are threatened. Fortunately, the FRS pension fund is secure and will remain so, despite any attempts to sensationalize an issue to the detriment of our public servants.
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