“We have a cautious approach to investing that includes meeting fund managers face-to-face to gather detailed information regarding how they do business,” said PERF Executive Director Terren Magid. Based on this single trip, we were able to identify an attractive and prudent private equity opportunity available at a significant discount. The result is an $8.8 million investment made in February that is now valued at approximately $16 million.”

This investment is part of an ongoing effort by PERF to implement an asset allocation designed to protect the portfolio from market downturns. The idea is that when one type of investment, such as public equity, is down, other types of investments may be flat or even up. While PERF cannot avoid the short term pain of today’s markets, this approach to investing helps mitigate the long term impact to PERF of major swings in the market.

Aggressive Cost Cutting Clearly PERF is not immune from the dramatic market drops of the past months and has certainly felt the pain of deflating investment values. So, while PERF’s investment team continues to look for opportunities to prudently diversify the PERF investment portfolio, the fund has been aggressively cutting costs.

Like public employees throughout Indiana, the PERF staff has gone without pay increases. In addition, many open positions have not been filled, and expenditures for everything from travel to pens and paper have been reduced.

“With these aggressive reductions in our operating costs, we project a savings of about 18 percent over the original budget for the fiscal year,” said Magid. “At the same time, we have not compromised on those things that are most important to the long term security of the fund, including closely monitoring our investment managers and looking for top-tier investment opportunities. We believe this level of due diligence continues to protect us from unscrupulous investment managers such as Bernie Madoff.”

An Eye to the Future PERF’s asset allocation was intentionally designed to weather market challenges and economic recessions. A strong asset allocation focused on diversification, combined with a prudent 30-plus-year investment horizon, means the fund is being managed to ensure members’ future benefits are not at risk now or in the future.

In addition to the recessionary opportunities such as the recent Asian private equity investment, PERF has an eye toward a post-recession future. When market stability and growth return, PERF is well positioned to take prudent advantage of improved conditions for the benefit of our members and employers.

In the meantime, the fund will continue aggressive cost cutting and close scrutiny of current investment managers while prudently identifying investment opportunities in the U.S. and around the globe.