Here is my recent letter to Treasurer Steiner and the Oregon Investment Council.

Treasurer Steiner’s recent email communication entitled “Keeping PERS Healthy” states that OPERF’s five-year returns of 7.7% keep Oregon on track to eliminate the unfunded liability within a decade, noting the five-year returns are above the PERS Board’s assumed rate of return of 6.9%.

This is all true as far as it goes. But for those of us who are familiar with the history of OPERF, the PERS Board, and PERS’s unfunded liability, Treasurer Steiner’s narrative is simplistic and frankly naive.

First I wish to call your attention to a my recent opinion piece published in the Oregon Capital Chronicle and a companion piece on my website describing decades of failures by PERS Boards, who first created large pension promises, then refused to ask for enough contributions to fund these promises.

The financial crisis of 2008 exposed the cost of their decisions as funding crashed to 80%. That was 17 years ago, and almost no progress has been made to this day on reducing the unfunded liability.

So, when Treasurer Steiner talks about five-year or even ten-year returns, that is only part of the picture.

The fact is that from January 2008 to December 2025, OPERF’s annualized rate of return is just under 6.7%. That is why the unfunded liability has defied reduction for so long. PERS Boards have refused to lower the assume rate of return enough.

But investment failures have also played a big role, especially the on-going four-year meltdown of OPERF, which I talked about in detail in my recent testimony to the Investment Council. Outsized bets on risk parity and private equity just as interest rates spiked were nothing less than catastrophic. A conservative back-of-the-napkin calculation shows that the failures of these two sectors, and the resulting substantial drawdown of public equities, apparently to meet cash needs, cost OPERF at least $5 billion when you consider the bull market in stocks that you mostly missed.

I do applaud the progress you are making in reducing your allocation to private equity and beginning to restore public equities to their target.

But I don’t see a meaningful post-mortem of the last four years, and little introspection that maybe private equity will not go back to the big returns of the past. Now that the long era of low interest rates is over (at least until the next financial crisis), it’s hard to imagine private equity rising up again. It’s has arguably reached a point where it’s more trouble than it’s worth, considering the sector’s high fees, illiquidity, opaqueness, lack of regulation, and controversial investments.

Finally, I call your attention once again to the Nevada PERS system, which now beats OPERF over the last one-, three-, five-, and ten-year periods with just a 15% allocation to private equity, a small staff, and much lower investment fees. There’s more than one way to have success in investing.