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Treasurer Cowell Warns of Low Bond Returns in
Nationally Broadcast CNBC Interview
Raleigh—In a nationally-broadcast interview on CNBC’s “Fast
Money” Tuesday evening, State Treasurer Janet Cowell warned that low returns
for bonds and fixed income pose a challenge to North Carolina’s $80 billion
pension fund and individuals trying to accumulate retirement savings.
“Fixed income is one of the highest risk places you can have
your money and that means you're not going to have the money you need for
retirement if you are putting your money in bonds,” Cowell said on the show.
“Alternatives look increasingly attractive given the volatility of the stock
Cowell also acknowledged the challenge of the outdated
notion that bonds are a safe investment.
“I’m still fighting the thought that a lot of people have,
particularly politicians, people that aren't in the investment class, that
bonds are low risk,” Cowell told “Fast Money” host Scott Wapner.
“The ultimate definition of risk is not being able to have
enough money to retire comfortably. Using that definition, bonds are a very
risky investment right now. As interest rates rise, the price of bonds will go down,” Cowell said in a statement
after the interview.
Cowell continued her call for investment flexibility
legislation to protect and grow the state’s pension fund. The state legislature
sets the fund’s allocations and Cowell is pushing for the ability to diversify
the portfolio to protect and grow the fund in the long term.
In May, the investment flexibility legislation (Senate Bill
558) passed 48-1 in the Senate. It also passed the House State Personnel
committee by a vote of 12-1 before being held up in the House Rules Committee.
In the First Quarter of 2013, fixed income lost 0.5%, while
the entire fund grew by 3.53%. Five-year projections for fixed income are 2-4%
according to investment experts, which poses a challenge to reaching the
pension funds 7.25% rate of return.
“The math does not work to hit the target rate of return. As
a result, taxpayers would have to provide greater support of our pension
system. That’s why we need the House to act immediately so that we can
diversify our portfolio and protect the retirement security of thousands of
North Carolinians,” Cowell concluded her statement.
Watch the entire interview here:
The North Carolina Retirement Systems, the formal name for
the pension fund, is now the tenth largest public pension fund in the country.
It provides retirement benefits and savings for more than 875,000 North
Carolinians, including teachers, state employees, firefighters, police officers
and other public workers. For more information, visit www.nctreasurer.com.