The Wall Street Journal writes, "Pension Cash Dwindles, Risking Liquidity Crunch," which tells us, "Cash allocations have dropped to a seven-year low at the funds that manage more than $4.5 trillion in retirement savings for America's teachers, police and firefighters. Public pension funds, which have increasingly turned to illiquid private markets to drive up returns, are now aiming to keep about 0.8% of their holdings in cash, according to data from the Boston College Center for Retirement Research. These funds are managing a juggling act faced by many institutional and household investors who want to put their money to work but also want easy access to it in a pinch." The piece explains, "The $496 billion California Public Employees' Retirement System, despite aiming for a slightly more conservative 6.8%, still plans to invest more in private markets, borrow against up to 5% of the fund, and keep less cash on hand, to meet that target, under a plan the board approved this month. Meanwhile, smaller pension funds serving school employees in Ohio, city workers in Illinois and other public employees across the country are putting more of their money into real estate, private equity or private debt. Public pension funds have hundreds of billions of dollars less on hand than the amount they will need to cover promised benefits after two decades of underfunding, unrealistic demands from public-employee unions, and losses during the 2007-2009 financial crisis." It adds, "Calpers staff said at a meeting earlier this month that the fund uses a dashboard to closely monitor liquidity, which is a measure of how easily holdings can be converted to cash without losses. The retirement fund, which is the nation's largest, eliminated its target of holding 1% of its assets in cash as part of the new asset allocation approved this month, which takes effect July 1, 2022. Finding a strategy that can accomplish what bonds once did, providing yield in good times and accessible cash in bad, is 'not a problem with an easy solution,' said Ash Williams, who recently retired as executive director and chief investment officer of the State Board of Administration, which manages investments for the Florida Retirement System. 'Everybody's wrestling with this same thing,' he said."

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