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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

#81

Post by kamaal »

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…

I don't think the problem is compensation. The problem is awarding overtime only in the last year, so that your pay and benefits can go up forever till you are entitled to pensions. This creates a situation where your pension + benefits can be in the ballpark of half a million dollars all life.

No one, no investment, no taxation can pay for something like that.

More here:

https://news.ycombinator.com/item?id=1638926

http://www.latimes.com/projects/la-me-el-monte-pensions/

https://news.ycombinator.com/item?id=14083193

>>Pensions are a fine tool but they have to be funded responsibly

And who is going to fund them? As of now California tax payers are paying for pensions. Surely this is not a sustainable way of running things?

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

#82

Post by yosefzeev »

As a resident of Kentucky, I can state that it has many issues. Of course, nationally, there are also many issues. Most of these issues boil down to "How do we put money in our pockets" at the expense of someone else. Until that stops, the issues won't stop.

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

#83

Post by ip26 »

bedhead wrote: post #39
ciamac wrote: post #33

Earlier quoted context omitted.

Well the direct mechanism in this case is hedge funds paying "placement agents" which fund the corruption, so they do have responsibility, even if they are not solely responsible.

The placement agent would be powerless if not for the pension board's incompetence and corruption, otherwise it wouldn't matter if the pension was being pitched by the marketer or the fund manager itself. Don't get me wrong, it's a game that hedge funds are playing and I despise it, but the disease is what goes on in the board room of the pension. All of this is a sideshow to the egregious overpromising of benefits a…

This sounds like the same debate we have about security. But sir, said the fox. I am innocent! For the hen coop was left unlocked!

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

#84

Post by mruts »

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.

The promise of hedge funds (the original one at least) is that they provide bond-like volatility with equity-like returns.

Of course, hedge funds nowadays are just defined by a compensation scheme (2 and 20, though today more like 1.5 and 15).

Hedge funds are exactly the kind of investments that pension funds should have.

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

#85

Post by mruts »

DSingularity wrote: post #66
1001101 wrote: post #40

Earlier quoted context omitted.

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.

What? No. Hedge funds are named for making highly risky investments. The short term risk of doing this is offset by hedging across markets and by using specific investment products. Works great until events like the housing market cause a market wide collapse and kill your hedgefund. Whoever concentrated the money in such funds was likely corrupt, otherwise grossly incompetent.

Do you work in finance? That's just not true at all.

Hedge funds are a very diverse group (see my above comment about how they are defined by compensation schemes nowadays and not strategies).

The original idea of hedge funds was to provide low volatility (like bonds) and high returns (like equities).

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

#86

Post by toomuchtodo »

refurb wrote: post #76
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…

With the implied understanding that the pension would remain solvent, and not strip mined by financial predators.

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

#87

Post by mruts »

The problem isn't with hedge funds, it's with dumb money (or corrupt money). I'm not sure why people are laying the blame on the funds, I'm sure they wanted to produce good returns as much as anyone else.

The blame solely lies on the incompetent pension fund managers. There are plenty good choices for alternatives in the market that are accepting new money (AQR or 2 Sigma or Bridgewater come to mind).

It's 100% on the pension fund managers that they squandered the money on some no-name fund with no track record.

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

#88

Post by dsfyu404ed »

lmm wrote: post #58
pc86 wrote: post #57

Earlier quoted context omitted.

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.

Please provide an example of these "continues existence" costs that the government is immune to.

>Whereas the defining characteristic of a private company is that it can, ultimately, go bankrupt and be wound up with little recourse.

Wall street already has countless mechanisms for pricing risk into things.

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

#89

Post by Duladian »

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...

Kentucky isn't the only state like this. California and other states have the same policy with teachers not being able to collect SS benefits. Although our pensions here for teachers are really nice.

https://www.nbclosangeles.com/news/local/Ripoff-Social-Secur...

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

#90

Post by mschuster91 »

lotsofpulp wrote: post #65
mschuster91 wrote: post #64

Earlier quoted context omitted.

> The same can be accomplished by paying them market wages. No. Even with paying market wages, there can someone come along and flood the market with cheap money. Then the state has to massively counteract and waste taxpayer money. Beamtentum is the core of German societal stability, as a result.

I don't know what "flooding with cheap money" means, but by definition, if a buyer is outbid by another buyer for something, then the market price has changed so the previous buyer needs to update to the new market price. I don't understand how this is a waste of taxpayer money, since it properly indicates to people where resources need to be shifted (in order to bring prices down). Without this market mechanism, you…

> I don't know what "flooding with cheap money" means, but by definition, if a buyer is outbid by another buyer for something, then the market price has changed so the previous buyer needs to update to the new market price.

Foreign money comes into a city and artificially (= not backed by local growth) drives up the prices, gobbles up the knowledge, then leaves. The city however is stuck with their now inadequately overpaid employees, which of course have every incentive to leave once the city inevitably tries to lower their pay again, thus basically holding the city at gunpoint: pay us or you shut down.

Just imagine how the finances of the Silicon Valley cities would be in that scenario - if they would go with the exorbitant pay rates for IT employees also for city staff, and another dotcom bust/financial crisis hits. The startups fold up, and the government is locked into now-enormous wages for the city employees.

And please don't act as if this wouldn't happen - half of SV economy / wealth is built up on dirt cheap Saudi blood money (as e.g. Uber and many others are finding out in the wake of the Khashoggi murder), and in Europe it's Chinese and Russian money instead of Saudi money. It's not a question of IF a bust happens, just WHEN. London is about to blow up in Brexit, I'm waiting for the chain reactions.

I'm not a fan of many German eccentric policies, but the Beamtentum is something that will keep the government running no matter how colossal the fuck-up. For example, something like the US gov't shutdowns is unimaginable here.

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