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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

#51

Post by gameswithgo »

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…

>There are too many areas of interest misalignment. Things that can be abused, will, and public pensions are perfectly designed to facilitate these kinds of shenanigans.

probably hedge funds, banks, loans, short selling, maybe even stock markets in general should also be illegal then for those same reasons?

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

#52

Post by tareqak »

leetrout wrote: post #26

My mom is retired and part of the Kentucky Retirement System. Fun fact most people don't know about some of these- you forfeit your social security benefits when you participate. Because of this my mom cannot draw my dead fathers benefits. https://www.courier-journal.com/story/news/education/2018/03...

I want to say something beyond, “this is wrong”, but I haven’t the words.

Does Kentucky not want teachers? There are shortages in some states.

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

#53

Post by lmm »

pc86 wrote: post #49
lmm wrote: post #42

Earlier quoted context omitted.

> 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.

For a private company to offer an annuity that an employee can have the same level of confidence in, the private company would have to do those too-important-to-fail things, and would have to include the costs of them in the cost of the annuity, which the government does not.

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

#54

Post by wbl »

iflint wrote: post #47
dopamean wrote: post #27

Earlier quoted context omitted.

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.

Mutual funds can be actively managed also. Hedge funds are a riskier investment: they are more opaque, can do more exotic things. But pension funds are sophisticated investors and should be able to make intelligent decisions about using them as part of a portfolio.

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

#55

Post by kamaal »

kylnew wrote: post #14

When it comes to pension funds, investing in anything volatile like hedge funds is an incredibly irresponsible thing to do. I’m kind of flabbergasted it’s even allowed in the first place. Pension funds should have steady, modest gains year over year and minimize risk of dips as much as possible.

>>When it comes to pension funds, investing in anything volatile like hedge funds is an incredibly irresponsible thing to do.

Ideally.

But then you have things like: https://www.mercurynews.com/2016/11/01/bart-janitor-grossed-...

and look at stories here: https://hn.algolia.com/?query=pensions&sort=byPopularity&pre...

Mostly unions graciously award over time work, and other benefits to people about to retire in the last years. Since the pension benefits are based on the benefits and pay in the last years, You now have retirees drawing millions in benefits and pay.

I guess in California a lot of tax dollars already go to pay pensions then help build schools and roads.

You can't exactly pay all that big money pensions by just investing in bonds alone.

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

#56

Post by zimablue »

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.

https://www.macrotrends.net/2324/sp-500-historical-chart-dat...

Maybe not over (specific) very short periods, but it depends on the mutual and it depends on the hedge fund. If you're saying pension funds should be locked in then you can't invest in anything that has exposure to equities, see: 2008, 1974, 1930.

I was just trying to nudge the post I was replying to into realisation that you either accept burning significant money to avoid risk or accept the chance of burning more money. This kind of "pensions should invest in the good guys who don't take risks..." well that's only govt bonds, and one day those will pop also.

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

#57

Post by pc86 »

lmm wrote: post #53
pc86 wrote: post #49

Earlier quoted context omitted.

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

For a private company to offer an annuity that an employee can have the same level of confidence in , the private company would have to do those too-important-to-fail things, and would have to include the costs of them in the cost of the annuity, which the government does not.

I'm not intentionally being dense, but I legitimately do not understand why the government would not need to wrap those costs into the annuity. They still need to get paid for, no?

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

#58

Post by lmm »

pc86 wrote: post #57
lmm wrote: post #53

Earlier quoted context omitted.

For a private company to offer an annuity that an employee can have the same level of confidence in , the private company would have to do those too-important-to-fail things, and would have to include the costs of them in the cost of the annuity, which the government does not.

I'm not intentionally being dense, but I legitimately do not understand why the government would not need to wrap those costs into the annuity. They still need to get paid for, no?

They're costs that the government already has because it already has to continue to exist, have failovers to the failovers and so on. Whereas the defining characteristic of a private company is that it can, ultimately, go bankrupt and be wound up with little recourse.

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

#59

Post by ConcernedCoder »

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…

what's wrong with 1) Let public-sector workers manage their retirements privately e.g. 401k-style .

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

#60

Post by cr1895 »

apo wrote: post #38

Pensions are Ponzi schemes, plain and simple, with government playing the role of Ponzi. Buried deep inside the idea of a government pension is the idea that individuals are incapable of saving for their own retirement. That government needs to care for its people in old age because they won't take the necessary steps themselves. Questionable assumptions aside, this article and many, many more like it demonstrate tha…

Maybe you should read up on, for example, the Dutch pension system.
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