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Tuesday, May 20, 2008
Rendell's rosy Turnpike forecast

  Pennsylvania Gov. Ed Rendell wants to invest the $10 billion+ he hopes to get for selling the Pennsylvania Turnpike (after paying off its debt) with the State Employees' Retirement System, which Rendell expects will earn 12 percent a year, or $1.1 billion, based on its reported returns for the last 20 years. Inquirer story here.
  SERS is more conservative in its expectations. SERS's own experts "expect the fund will earn 8.5 percent per year each year between now and 2012. The struggling financial markets at the outset of 2008 should remind us that it may not be possible to meet, let alone outperform, our investment goal every year," SERS chairman Nick Maiale, a Philadelphia lawyer, Harrisburg lobbyist and longtime Democratic Party ward leader, cautioned in a letter accompanying the system's annual report to state legislators earlier this year.
  See Maiale's letter, which also discusses state taxpayers' subsidies to the pension system, on Page 2 of the SERS report, here.
  Also, it's not yet clear how and when the state would recover the returns SERS reports. A majority of the system's reported profits are based on its managers' estimates of the value of investments in hedge funds, private equity, venture capital, real estate, and other untraded assets that are held for years and aren't throwing off cash on a regular basis.
  Taxpayers and tollpayers can look forward with interest to more details of the governor's plan.

Posted by Joseph N. DiStefano @ 9:24 AM  Permalink | 2 comments
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Comments
Posted by TheRock2020 01:11 PM, 05/20/2008
What a surprise, Rendell giving millions of the public's dollars to a fellow Democrat cronie to curry favor and gain political capital. Maybe old Eddie should pick up an Ibbotson's report to see that equities have averaged between 6% and 8% per year since 1926, and that it may be a little bit of a reach to expect a 12% return, especially from a fund that has a conservative investment mandate to follow. But then again, 8% doesn't sound as catchy in the headline, not that this left leaning newspaper would ever take him to task for it anyway. Why people give this guy a free pass I'll never know.
Posted by distefj 07:12 PM, 05/20/2008
If you're saying SERS chairman Maiale is Rendell's "crony", spell it right, willya? I'm not sure how SERS board members are the beneficiaries here. The $10 billion would be more obviously welcome by the private managers who handle most state funds, collecting hundreds of millions a year. As this newspaper has documented, some of those managers have been generous contributors to elected officials of both parties, via campaign contributions. As I quoted then-State Treasurer (and then-Republican) Barbara Hafer in 2001 re contributions by state investment contractors, "I hope they give me money. And I hope they vote for me." She added that she'd still fire them if they lost too much money.
2 comments
About Joseph N. DiStefano
Your source for M&A, commercial real estate and private equity news in Philadelphia and nearby. By Inquirer business reporter Joseph N. DiStefano. Joe has worked for the Inquirer, mostly, since 1988. Last year he covered Citigroup for Bloomberg News. He's the author of Comcasted, a book about Philadelphia’s most-valuable company. He holds a degree in economics from Penn.