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State fund reports first loss in 5 years

Fri., June 20, 2008

In a report that might comfort investors discouraged by their own personal losses, the Washington State Investment Board Thursday reported its first quarterly loss in five years – a little matter of $2.7 billion.

The loss for the three-month period that ended March 31 dragged returns for the current fiscal year to a negative $788 million.

The Commingled Trust Fund, which contains much of the money set aside for Washington public employee retirements, has not suffered a quarterly loss since 2003, when returns for the January-March quarter backpedaled 1.5 percent. The last annual loss – 5.2 percent – occurred in 2002.

By comparison, the quarterly and fiscal year-to-date losses for 2008 equal 3.63 percent and .06 percent, respectively.

The fund held $63.1 billion as of March 31.

Despite the recent loss, returns over the past 10 years continue to exceed 8 percent, the tipping point for determining whether contributions to a fund should be increased.

The long-term performance was boosted by six years of double-digit returns, including 21.3 percent for the fiscal year that ended June 30, 2007.

Executive Director Joe Dear said prospects for a positive return for the soon-to-expire 2008 fiscal year are iffy.

“The last couple of days haven’t been that helpful,” he said, adding that board staff will not have a real sense of how the year shook out until mid-July.

The 5.4 percent return for the 12 months ended March 31, he noted, far exceeds the 1.33 percent average for all public pension funds.

But returns for a quarter, or a year, are not as important as conceiving and sticking with a sound asset-diversification plan, Dear said.

The board’s portfolio includes the usual bonds and stocks – heavily weighted toward international funds – as well as real estate and private equity, both of which have produced 10-year returns in the neighborhood of 15 percent.

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