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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

#71

Post by SilasX »

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…

>General mismanagement (I can assure you the best and brightest investors and fiduciaries don't work at public pensions)

You don't really need "the best of the best" to run a public pension; you're not trying to outsmart the markets with some super-clever arbitrage. You just need to invest in the right balance of index funds.

If you need the very best people not to raid the pension because it had one good year when the markets were up, we're all screwed.

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

#72

Post by seanhunter »

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...

That's appalling. I wish I could offer more than mere sympathy but I'm truly horrified by this.

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

#73

Post by seanhunter »

1001101 wrote: post #40
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.

Pensions needed to reach for yield with the fed funds rate scraping zero for the better part of a decade. > Pension funds should have steady, modest gains year over year and minimize risk of dips as much as possible. This is what hedge funds were built for - hedging.

I believe they are actually so named because the instruments they originally invested in (primarily derivatives) had previously been for hedging positions in cash markets (ie markets on the underlyers) and "hedge funds" were the first funds that just used these "hedge instruments". They always used them primarily for speculation though, not primarily hedging.

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

#74

Post by SilasX »

rtkwe wrote: post #70
kamaal wrote: post #55

Earlier quoted context omitted.

>>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 l…

The thing the galls me the most about that article is it doesn't once stop to try to say or find out how much the guy is working to bring in that much, spoiler it's going to be a lot of hours given it's overtime and his base compensation is only 50k. Pensions are a fine tool but they have to be funded responsibly, states liked to use them as an incentive but then refused to properly fund them banking instead on large…

>The thing the galls me the most about that article is it doesn't once stop to try to say or find out how much the guy is working to bring in that much, spoiler it's going to be a lot of hours given it's overtime and his base compensation is only 50k.

You're right, it deceptively leaves out such vital information.

It also leaves out:

- how productive he actually was for each of those 80 hours

- how many workers "only" at 1.5x time were willing to take those shifts but denied because of seniority

- how much of the compensation came from the non-standard practice of letting him redeem PTO for 2x its value by applying it to week where he already worked overtime

- whether those long, hard hours actually translated into clean BART stations, or were just roundabout compensation for being physically present but ineffective

Once you have that full picture, I'm pretty sure the typical person's initial reaction will be closer to right than wrong.

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

#75

Post by SilasX »

seanhunter wrote: post #72
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...

That's appalling. I wish I could offer more than mere sympathy but I'm truly horrified by this.

Why appalling? You also don't have to pay the SS taxes under such schemes and they typically give a better return because they're not effectively invested 100% in government bonds.

(The problem, of course, is when someone raids the fund itself.)

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

#76

Post by refurb »

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...

The reason Kentucky teachers don't get Social Security dates back to 1935 when the Social Security law was enacted, leaving out state and municipal employees, said Beau Barnes, deputy executive director of the Kentucky Teachers' Retirement System, or KTRS...Teachers do not pay into Social Security but pay into their state retirement systems.

It sounds like that was a conscious choice. It's not like it was taken away from them.

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

#77

Post by sp332 »

SilasX wrote: post #75
seanhunter wrote: post #72

Earlier quoted context omitted.

That's appalling. I wish I could offer more than mere sympathy but I'm truly horrified by this.

Why appalling? You also don't have to pay the SS taxes under such schemes and they typically give a better return because they're not effectively invested 100% in government bonds. (The problem, of course, is when someone raids the fund itself.)

But if the spouse did pay SS all their working lives, they should be able to get the benefits.

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

#78

Post by SilasX »

sp332 wrote: post #77
SilasX wrote: post #75

Earlier quoted context omitted.

Why appalling? You also don't have to pay the SS taxes under such schemes and they typically give a better return because they're not effectively invested 100% in government bonds. (The problem, of course, is when someone raids the fund itself.)

But if the spouse did pay SS all their working lives, they should be able to get the benefits.

Ah, misunderstood that people were reacting to the second sentence ("because of this ..."). That part is definitely stupid. The "spousal benefit" should be considered as attached to the earner and should be unaffected the spouse's waiver of her own accrued SS benefits.

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

#79

Post by mikeash »

SilasX wrote: post #75
seanhunter wrote: post #72

Earlier quoted context omitted.

That's appalling. I wish I could offer more than mere sympathy but I'm truly horrified by this.

Why appalling? You also don't have to pay the SS taxes under such schemes and they typically give a better return because they're not effectively invested 100% in government bonds. (The problem, of course, is when someone raids the fund itself.)

The whole point of SS is to be a reliable backstop you can count on even if “wiser” investment strategies fail.

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

#80

Post by bedhead »

SilasX wrote: post #71
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…

>General mismanagement (I can assure you the best and brightest investors and fiduciaries don't work at public pensions) You don't really need "the best of the best" to run a public pension; you're not trying to outsmart the markets with some super-clever arbitrage. You just need to invest in the right balance of index funds. If you need the very best people not to raid the pension because it had one good year when t…

I would agree...and many of these pension boards are so bad they can't even to that.
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