eastern district of wisconsin milwaukee county, employee

Mercer here was responding to a request from County Executive Ament, who had wanted to
know “what's the impact of these things going to be, you know, over the next five – five years or
so if the plan has zero percentage increase or if it earns five percent or ten percent. I mean what
– how is that going to impact the dollar amount that we have to contribute.” 64
But Mercer’s analysis is qualified by an express caveat – that “past performance is not a
guarantee of future results,” because “interim volatility is not only a probability, but almost a
certainty.” This is the precise type of caveat that is commonplace in investment performance
reporting by portfolio managers. Indeed, it is a caveat that the Plaintiffs would have been
familiar with, as shown in the Pension Board’s standard contract with its portfolio managers,
which has for many years included the following language: “The Board recognizes that risk is
inherent in any investment in securities and that the Manager cannot guarantee any level of
return on the Assets.” This investment manager contract is a thirteen-page document with
recitals and specific agreements detailed, signed by the parties. 65 Yet, Plaintiffs are strangely
(and unreasonably) interpreting as a “guarantee” of future investment results a two-page letter
from Mercer that says in very common language that it is “not a guarantee of future results.”
But, of course, neither Ament nor Dobbert have testified that they realistically viewed
Soderstrom’s letter as a “guarantee” of anything, or relied on it as such. In his deposition,
Ament testified as follows:
Q Okay. My question was really at this time did you believe
that Mercer was somehow guaranteeing that performance?
64 PFF, 129. Three days earlier, Mercer had provided Dobbert a letter attaching multiple charts showing the
County’s projected contribution if, over a five-year period, the ERS earned 0%, 5%, 8.5% or 12% investment
returns. PFF, 130.
65 PFF, 131. Reports from ERS investment managers also routinely contain disclaimers stating that “[p]ast
performance does not guarantee future results, which will vary.” PFF, 132.
QBACTIVE\6280487.1 29
Case 2:06-cv-00372-CNC Filed 06/09/2008 Page 29 of 52 Document 110