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How a Gang of Hedge Funders Strip-Mined Kentucky’s Public Pensions

theintercept.com

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Re: How a Gang of Hedge Funders Strip-Mined Kentucky’s Public Pensions

#41

Post by noer »

coughupalung wrote: post #37
zimablue wrote: post #19

Earlier quoted context omitted.

That's cool, so US bonds only then?

Don't forget mortgage-backed securities.. oh wait. In all seriousness though, large pension plans have very diverse portfolios. Ontario teachers used to own 80% of the Toronto Maple Leafs. Ontario Municipal Employees Retirement System owns Oxford Properties, which owns and manages the office building I work in (and many others). Edit: Added "Employees" to OMERS.

Major League Sports teams are generally pretty solid investments. Also, the Ontario Teachers didn't just own the Leafs, they owned MLSE which includes the Leafs, Raptors, Argos, Toronto FC, the Marlies plus the arenas at which those teams play. It's not a bad investment to own all but one (they don't own the Jays) pro sports team in a city.

Re: How a Gang of Hedge Funders Strip-Mined Kentucky’s Public Pensions

#42

Post by lmm »

dsfyu404ed wrote: post #35
lmm wrote: post #31

Earlier quoted context omitted.

> If a private entity can’t afford to offer annuities without the power to increase taxes, then they are obviously a very, very expensive benefit, so why should only government employees get them? Because the government can provide them more cheaply than a private entity by its very nature - shouldn't it make use of that competitive advantage? Better pension schemes are one of the ways government are able to offer a…

>Because the government can provide them more cheaply than a private entity by its very nature Please justify this. Public sector is not known for it's low overhead of efficiency.

> Please justify this.

The point is the government is already "too important to fail" and already bearing the costs of having to still exist in hundreds of years' time (in terms of plans, processes, backstops and all that).

> Public sector is not known for it's low overhead of efficiency.

True enough, but neither are large private financial institutions.

Re: How a Gang of Hedge Funders Strip-Mined Kentucky’s Public Pensions

#43

Post by matthewdgreen »

bedhead wrote: post #22

Kentucky's pension is screwed for all of the same reasons many other public pensions are (in order of importance): - Overpromising of benefits - Underfunding mechanisms that allow deferral of contributions - General mismanagement (I can assure you the best and brightest investors and fiduciaries don't work at public pensions) - Corruption (ie related party deals) The idea that "evil hedge funds" are responsible is si…

Except that the article isn't about any of those things. It's about a very specific set of abuses related to hedge funds.

Re: How a Gang of Hedge Funders Strip-Mined Kentucky’s Public Pensions

#44

Post by matthewdgreen »

Mvandenbergh wrote: post #6

So there's a lot going wrong here, pay-to-play, investment in hedge funds that no-one had ever heard of, investment in funds that ended up performing poorly, etc. However that isn't the real problem here - the real issue is decades of under-contribution to these funds by the state government.

This article isn't really about under-contribution. It's about corruption. If your response to an article about corruption is to change the subject, then it's unlikely that we'll see improvements.

Re: How a Gang of Hedge Funders Strip-Mined Kentucky’s Public Pensions

#45

Post by coughupalung »

noer wrote: post #41
coughupalung wrote: post #37

Earlier quoted context omitted.

Don't forget mortgage-backed securities.. oh wait. In all seriousness though, large pension plans have very diverse portfolios. Ontario teachers used to own 80% of the Toronto Maple Leafs. Ontario Municipal Employees Retirement System owns Oxford Properties, which owns and manages the office building I work in (and many others). Edit: Added "Employees" to OMERS.

Major League Sports teams are generally pretty solid investments. Also, the Ontario Teachers didn't just own the Leafs, they owned MLSE which includes the Leafs, Raptors, Argos, Toronto FC, the Marlies plus the arenas at which those teams play. It's not a bad investment to own all but one (they don't own the Jays) pro sports team in a city.

Ah right! Thank you for the correction.

Re: How a Gang of Hedge Funders Strip-Mined Kentucky’s Public Pensions

#46

Post by MrMorden »

tareqak wrote: post #3

This article was a sad, and infuriating read. The knee-jerk-response part of me would want these pension funds to be set up as an allocation of 'dumb'/passive index funds based on an individual's retirement date to not have to deal with greed on the part of human decision-makers, but there might be catastrophic issues with that too. Edit/Follow-up: I guess there are two more sane alternatives: 1) Let public-sector wo…

There are two equitable solutions: either allow everyone to opt-out of Social Security, or allow no one to. The second is closer to the system we have now; the first would require major changes (subsidizing retirement for low-income workers from income tax instead of SS tax). It's also possible that the 10th Amendment may prevent the federal government from mandating state/municipal employee participation.

The US federal government previously had a system similar to state pensions (CSRS), but employees hired after 1983 are required to be enrolled in the new system (FERS) which includes Social Security. There's also another difference: the federal government has far better internal controls than most of its states.

Re: How a Gang of Hedge Funders Strip-Mined Kentucky’s Public Pensions

#47

Post by iflint »

dopamean wrote: post #27
zimablue wrote: post #19

Earlier quoted context omitted.

That's cool, so US bonds only then?

Don't BR ridiculous. There are lots of mutual funds that don't experience the swings that many hedge funds do.

There are many hedge funds with much lower volatility than the average mutual fund. Hedge funds are not inherently more or less risky than mutual funds, they are just actively managed instead of passively managed.

Re: How a Gang of Hedge Funders Strip-Mined Kentucky’s Public Pensions

#48

Post by NTDF9 »

Why do American politicians allow their people to be conned into thinking that there will be some "automatic" growth somewhere in their state/country that will automatically yield benefits in their pensions?

That lie, that something in the US will ALWAYS lead to gdp growth is the root of all yield chasing fiascos of American pension underfunding. There is no way that gdp will increase without a rise in working age population (especially with no immigrants) or a dramatic increase in automation which can be taxed.

FYI for any youngsters who don't realize what a con job this is: The recent tax cuts have created massive deficits which will collapse debt availability and thus economic growth and thus tax revenues and thus social security payments when you get unemployed (or old).

Re: How a Gang of Hedge Funders Strip-Mined Kentucky’s Public Pensions

#49

Post by pc86 »

lmm wrote: post #42
dsfyu404ed wrote: post #35

Earlier quoted context omitted.

>Because the government can provide them more cheaply than a private entity by its very nature Please justify this. Public sector is not known for it's low overhead of efficiency.

> Please justify this. The point is the government is already "too important to fail" and already bearing the costs of having to still exist in hundreds of years' time (in terms of plans, processes, backstops and all that). > Public sector is not known for it's low overhead of efficiency. True enough, but neither are large private financial institutions.

None of what you've said explains how a government can offer an annuity more cheaply than a private company.

Re: How a Gang of Hedge Funders Strip-Mined Kentucky’s Public Pensions

#50

Post by lotsofpulp »

mschuster91 wrote: post #30
lotsofpulp wrote: post #25

Earlier quoted context omitted.

I don’t see what the benefit of that system is as opposed to paying someone market price for their labor. If anything, it just allows an avenue for taxpayers (mostly in the future) to be stolen from.

> I don’t see what the benefit of that system is as opposed to paying someone market price for their labor. The benefit is that Beamte are locked in to the state. It's rare that the private sector snatches Beamte away from the state. This means that, unlike in the private sector, the state does not have to worry that its most competent employees suddenly vanish.

The same can be accomplished by paying them market wages. In addition, it would provide a transparent accounting of expenditures and prevent politicians and union leaders and others from scamming taxpayers like they currently are.
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