Nevada pension plans suffer $22 million loss

Erin Neff

Thursday, Jan. 24, 2002 | 10:06 a.m.

Nevada's Public Employees Retirement System lost $22 million when Enron stock shares plummeted from about $70 to under 70 cents in a year.

The loss won't affect benefits for the 107,000 participants statewide, officials said, but it could lead PERS to fire an outside fund manager.

"There is in no way any threat to our membership or benefits," Laura Wallace, PERS' investment officer, said. "We will have to analyze the performance of all of our portfolios and make a management decision on whether to terminate a manager."

PERS, which is administered independently of the state treasurer's office, has assets in 20 different portfolios supervised by external fund managers. It is the pension fund for all public employees in Nevada, including police officers, firefighters, public schoolteachers, and city, county and state workers.

About $6 million was lost in a stock portfolio investing in the Standard & Poor 500 index. That fund had no external manager because it relied solely on the ups and downs of that index.

"We took that pro rata loss from the S&P as we would with a loss to IBM or GE," Wallace said.

But PERS lost $16 million in a bond fund investing in Enron-named bonds and subsidiary issues. Since the bond fund had fewer issues, Enron's plunge created a greater loss than it did in the stock fund.

If the bond fund's performance is significantly impacted by the Enron losses over the next quarter or year, Wallace said PERS would consider terminating the external adviser who managed the fund.

"It depends on how those losses will affect overall performance over a quarter or six months or a year," she said.

Nevada's losses are small in context to those sustained by individual investors, Enron employees and the California Public Employees Retirement System, which invested $500 million in an Enron partnership in 1997.

The $22 million loss -- while it would cripple an individual investor -- is also easier for Nevada's retirement system with $13.4 billion in assets to sustain.

Wallace said she is not sure if the Enron losses were the greatest single-issue loss in PERS history. The portfolio also sustained losses when technology stocks crumbled.

"Our business is a business of having fewer losses than gains," Wallace said. "We're going to have losses, and that's why we diversify the portfolio in every aspect."

PERS allocates the pension fund as follows: 35 percent in U.S. stocks; 10 percent in international stock; 35 percent in U.S. bonds; 10 percent in international bonds' and 10 percent in U.S. real estate.

"It's a very conservatively structured fund," Wallace said.

PERS has 24,000 retirees and 83,000 active members, including a number of Nevada's lawmakers.

Assembly Speaker Richard Perkins, D-Henderson, who is a deputy police chief in Henderson, said, "Ow. That hurts" when told of PERS' $22 million loss. The PERS loss was a bit ironic as Perkins also received a $500 campaign contribution from Enron a year ago.

Enron's downfall, now the subject of a federal investigation and scrutiny on Capitol Hill, had a greater impact on individual investors, such as Patricia Hooks of Las Vegas.

Hooks, a roulette dealer, bought 30 shares of Enron at $42 on the advice of her accountant. She watched the stock rise to a high of almost $80.

"I thought, wow, that's better than betting $1,200 and getting blackjack," Hooks said. "Now it's all gone."

The state's investments -- separate from PERS -- fared a bit better. The $2 billion portfolio of money from the state's general fund and from various programs that generate revenue, had no exposure to Enron, Treasurer Brian Krolicki said.