Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

theintercept.com

Post reply on HN
Print view View original

21–30 of 109 posts

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

#21

Post by lmm »

rrdharan wrote: post #18
lmm wrote: post #13

Earlier quoted context omitted.

A long time horizon is supposed to be what governments are good at. No reasonable employee would trust a private insurance company to still be in business by the time they come to require, absent a governmental guarantee - and if something is both paid for by the government-as-employer and guaranteed by the government-as-regulator, what is bringing in a private company supposed to add to the mix other than taking pro…

Several private insurance companies been in business nearly as long as the US government I believe..

Well in reality the insurance industry is highly regulated and ultimately backed by the promise of government bailouts.

(Of course some companies from a pre-government-guarantee era are still in business, but "some" isn't enough when we're talking about your retirement savings)

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

#22

Post by bedhead »

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 silly. This might make for more clicks but the investment committee made the decisions to invest, so blame them. This isn't about hedge funds.

I've long argued that public pensions should be illegal. 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. Anyone looking for what the next great crisis will be, this is it.

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

#23

Post by lotsofpulp »

lmm wrote: post #13
lotsofpulp wrote: post #11

Earlier quoted context omitted.

There’s no reason government employees should get taxpayer guaranteed annuities. If the government employee unions want annuities upon retirement, they should be purchased from insurance companies. That way taxpayers can be certain there were no shenanigans in underfunding or mispricing or malinvesting. It would also create more transparency in how much people should be paid in government vs non government jobs. It w…

A long time horizon is supposed to be what governments are good at. No reasonable employee would trust a private insurance company to still be in business by the time they come to require, absent a governmental guarantee - and if something is both paid for by the government-as-employer and guaranteed by the government-as-regulator, what is bringing in a private company supposed to add to the mix other than taking pro…

It adds transparency and accountability. And it’s up to the government employees if they want to bring in a private company. As a taxpayer, and employer of government employees, I would like a clear accounting of how much payroll is.

I don’t want politicians buying union votes with unsustainable promises that get kicked down the road 20 years later, and I don’t want to hear “my predecessors didn’t properly fund the pensions”. You create a system loopholes and bad incentives, of course they are going to be used.

The solution is simple, time saving, and efficient. 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?

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

#24

Post by lotsofpulp »

tareqak wrote: post #16
lotsofpulp wrote: post #11

Earlier quoted context omitted.

There’s no reason government employees should get taxpayer guaranteed annuities. If the government employee unions want annuities upon retirement, they should be purchased from insurance companies. That way taxpayers can be certain there were no shenanigans in underfunding or mispricing or malinvesting. It would also create more transparency in how much people should be paid in government vs non government jobs. It w…

I can see your point from a policy level. However, once you have generations of government employees on this scheme such that their retirement planning is based around it, then it becomes much harder for everyone involved to adjust. From the article, it seems that teachers don't have Social Security withheld, so they don't have that as a fallback either: Teachers, like any other public employees who don’t have Social…

Private companies do it all the time, it’s called freezing the pension plan.

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

#25

Post by lotsofpulp »

mschuster91 wrote: post #12
lotsofpulp wrote: post #11

Earlier quoted context omitted.

There’s no reason government employees should get taxpayer guaranteed annuities. If the government employee unions want annuities upon retirement, they should be purchased from insurance companies. That way taxpayers can be certain there were no shenanigans in underfunding or mispricing or malinvesting. It would also create more transparency in how much people should be paid in government vs non government jobs. It w…

> There’s no reason government employees should get taxpayer guaranteed annuities There is. In Germany, the Prussians back in the 18th century formed the "Berufsbeamtentum", basically civil servants. The idea is that the state guarantees that the Beamten be permanently employed by the state (basically, short of committing serious crimes > 12mo jail time, there is no way for the state to fire one), have their (first c…

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.

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

#26

Post by leetrout »

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...

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

#27

Post by dopamean »

zimablue wrote: post #19
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.

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.

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

#28

Post by candiodari »

TLDR: politically appointed trustees of a pension fund systematically invest in somewhat-fraudulent investment schemes, which shock horror had some questionable financial returns (they were in fact quite large, but with a minus in front). This is, obviously, the fault of all bankers on Wall Street, not of the appointed trustees or of the politicians appointing them.

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

#29

Post by bluGill »

tareqak wrote: post #7
bradleyjg wrote: post #5

Earlier quoted context omitted.

The difficulty with moving to a defined contribution scheme, which makes a tremendous amount of sense, is that the employer-governments actually have to pay the costs of their promises instead of kicking the can down the road. Taxpayers don’t like that because they’d rather pretend to believe that investment returns will fix everything while really just saddling the next generations. Government employees don’t like t…

From my reading of the article, the pension contributions were already being made in this case (it wasn't clear to me if it was directly made by the teachers or the state). Your concern is a valid one, but I didn't see the state repurposing the pension contributions for something else in this case.

Pension contributions have been made. In the best case they are large enough to cover everything. However in all the likely cases they won't have enough money to pay out their promises. If more money went in there would be enough returns with reasonable investments. Or you can chase risky investments and hope that better than average returns pay you back.

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

#30

Post by mschuster91 »

lotsofpulp wrote: post #25
mschuster91 wrote: post #12

Earlier quoted context omitted.

> There’s no reason government employees should get taxpayer guaranteed annuities There is. In Germany, the Prussians back in the 18th century formed the "Berufsbeamtentum", basically civil servants. The idea is that the state guarantees that the Beamten be permanently employed by the state (basically, short of committing serious crimes > 12mo jail time, there is no way for the state to fire one), have their (first c…

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.

Post reply on HN