US State Pensions Suffer $1.4 Billion Loss From BP Oil Ignominy

Public pensions such as CalPERS, Florida and Texas Teachers lose from holdings in BP, whose value continues to plummet.

(June 22, 2010) — The $210 billion California Public Employees’ Retirement System (CalPERS) lost a total of $284.6 million in value following the biggest oil spill in history, which wiped out more than $1.4 billion from BP shares held by US state pensions.

The decrease in share price by BP has triggered mounting losses among institutional investors. Along with pension losses, recent data has shown the governments of Norway, Kuwait, China and Singapore have lost $5 billion on BP Plc’s share price collapse.

According to data compiled by Bloomberg, the pension losses come from 42 state retirement accounts. US public pension systems held more than 300 million shares of London-based BP, according to data through May 1.

BP has lost 47% of its value since the April 20 explosion aboard a rig in the Gulf of Mexico that killed 11 workers and caused immeasurable destruction of the wildlife, beaches, and marshlands.

The pension declines come as public pension funds are struggling to recover from investment losses that averaged 21% last year, according to Wilshire Associates of Los Angeles.

Nevertheless, the total pension loss of $1.4 billion represents a small fraction for funds that manage more than $2.4 trillion, the estimate for the 100 largest public pensions at the end of 2009, according to the Census Bureau. The bureau reported that the top 100 funds account for more than 89% of total public pension value.

With 58.2 million shares of BP on April 20, CalPERS, the largest US pension, held more shares of BP than any other state scheme. The California fund saw the value fall to $301 million from $585.7 million, according to Bloomberg data. “We are large enough to sustain reversals of individual portfolio companies,” said CalPERS’ Clark McKinley to ai5000. “As a long-term investor, we have been able to weather similar setbacks to other companies over the years. However, we certainly are concerned about the loss of BP share value and will be engaging the company to discuss the impact of the Gulf of Mexico crisis along with corporate governance issues.”

Along with CalPERS, other public retirement funds with large holdings in the oil giant include the California State Teachers’ Retirement System (CalSTRS), which lost $104.8 million, followed by Florida’s state pension and the Texas Teachers Retirement System, according to Bloomberg data.

“Our millions of dollars in losses from the BP spill has no consequence on the health of the fund at this point,” Dennis D. MacKee, spokesperson for the Florida Retirement System’s $114.2 billion pension, said to ai5000. “We’re long-term investors and short-term volatility is not something that scares us.”

“The TRS fund, ranked number seven in assets among U.S. public pension funds, remains highly diversified in its investments, and developments related to BP have had no material impact on the fund. Member pension benefits are not impacted by this event,” confirmed Texas Teachers with ai5000.

The Pennsylvania School Employees Retirement System, whose BP holdings declined in value by about $30 million, and the New York state’s $129 billion Common Retirement Fund, which holds 17.5 million BP shares, have also been affected by the BP disaster. The funds are planning to cut retirement benefits and seek higher payments from taxpayers to offset investment losses, Bloomberg reported.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742