Frequently Asked Questions – Investments & Financials
Investments are the engine that powers most of the retirement benefits SCERS pays each month. While contributions from members and employers are important, investment earnings provide the largest share of funding. This section answers common questions about how SCERS invests, manages risk, and ensures transparency.
FAQs for Investments & Financials
Where does the money to pay retirement benefits come from?
SCERS benefits are funded from three main sources: contributions from members, contributions from employers, and investment earnings. Historically, investment earnings have provided the majority of funding, which is why a strong investment strategy is so important.
Who decides how SCERS invests its assets?
The SCERS Board of Retirement is responsible for investment decisions under the California Constitution. The Board sets policies and approves the strategic asset allocation, while SCERS staff and independent investment consultants implement those policies and monitor performance.
What is “strategic asset allocation” and why does it matter?
Strategic asset allocation is the long-term plan for how SCERS divides its assets across different categories such as stocks, bonds, real estate, and alternatives. This mix is designed to balance risk and return, ensuring the system can meet its long-term obligations while protecting against market downturns.
What role do alternative assets like private equity or real estate play in the portfolio?
Alternative assets provide diversification and potential for higher long-term returns. They also behave differently than traditional stocks and bonds, which helps stabilize the portfolio. Because these investments can be complex, SCERS has strict policies in place to ensure managers are held to high fiduciary standards.
How does SCERS make sure its investments are safe and well-managed?
SCERS follows a comprehensive Master Investment Policy Statement that sets standards for risk management, diversification, and oversight. Independent consultants provide analysis, performance is reviewed quarterly, and reports are shared publicly. In addition, external audits and actuarial reviews add further layers of accountability.
What does it mean when SCERS reports its “funded status”?
Funded status measures the ratio of assets to liabilities—essentially, how much of the benefits earned by members are covered by assets on hand. A higher funded status means the plan is in a stronger position to meet its long-term obligations.
How can members see how SCERS investments are performing?
Members and the public can access quarterly investment reports, the Investment Year in Review and Annual Plan, the Annual Comprehensive Financial Report (ACFR), and other documents directly on scers.gov. These reports show performance results, funding progress, and investment costs in a transparent way.
Are SCERS’ investments affected by market downturns?
Like all investors, SCERS is impacted by market volatility. However, the system’s diversified portfolio and long-term focus help smooth out short-term fluctuations. SCERS also uses portfolio analytic systems, risk assessment reports, and stress tests to plan for different scenarios and keep the system resilient.