Send a Tweet
Most Popular Choices
Share on Facebook 2 Share on Twitter Share on LinkedIn Share on Reddit Tell A Friend Printer Friendly Page Save As Favorite View Favorites
OpEdNews Op Eds

A Pension Jackpot for Wall Street

By       Message David Sirota       (Page 1 of 1 pages)     Permalink    (# of views)   5 comments

Related Topic(s): ; ; ; , Add Tags
Add to My Group(s)

Well Said 1   Supported 1   Valuable 1  
View Ratings | Rate It

opednews.com

Author 18
Become a Fan
  (9 fans)
- Advertisement -

Cross-posted from Truthdig


Wall Street
(Image by Shutterstock)
  Permission   Details   DMCA

Most consumers understand that when you pay an above-market premium, you shouldn't expect to get a below-average product. Why, then, is this principle often ignored when it comes to managing billions of dollars in public pension systems?

- Advertisement -

This is one of the most significant questions facing states and cities as they struggle to meet their contractual obligations to public employees. In recent years, public officials have shifted more of those workers' pension money into private equity, hedge funds, venture capital and other so-called "alternative investments." In all, the National Association of State Retirement Administrators reports that roughly a quarter of all pension funds are now in these "alternative investments" -- a tripling in just 12 years.

Those investments are managed by private financial firms, which charge special fees that pension systems do not pay when they invest in stock index funds and bonds. The idea is that paying those fees -- which can cost hundreds of millions of dollars a year -- will be worth it, because the alternative investments will supposedly deliver higher returns than low-fee stock index funds like the S&P 500.

Unfortunately, while these alternative investments have delivered a fee jackpot to Wall Street firms, they have often delivered poor returns, meaning the public is paying a premium for a subpar product.

- Advertisement -

In New Jersey, for example, the state's alternative investment portfolio has trailed the stock market in seven out of the last eight years, while costing taxpayers almost $400 million a year in fees. Had the state followed the advice of investors like Warren Buffett and instead invested its alternative portfolio in a low-fee S&P 500 index fund, New Jersey would have had more than $5 billion more in its pension fund. In all, as New Jersey plowed more pension money into alternatives, its pension returns have routinely trailed median returns for all public pension systems.

Click Here to Read Whole Article

 

- Advertisement -

Well Said 1   Supported 1   Valuable 1  
View Ratings | Rate It

opednews.com

David Sirota is a full-time political journalist, best-selling author and nationally syndicated newspaper columnist living in Denver, Colorado. He blogs for Working Assets and the Denver Post's PoliticsWest website. He is a Senior Editor at In These Times magazine, which in 2006 received the Utne Independent Press Award for political coverage. His 2006 book, Hostile Takeover, was a New York Times bestseller, and is now out in paperback. He has been a guest on, among others, CNN, MSNBC, CNBC and NPR. His writing, which draws on his (more...)
 

David Sirota Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

Go To Commenting
The views expressed herein are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.
Writers Guidelines
Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles
Support OpEdNews

OpEdNews depends upon can't survive without your help.

If you value this article and the work of OpEdNews, please either Donate or Purchase a premium membership.

STAY IN THE KNOW
If you've enjoyed this, sign up for our daily or weekly newsletter to get lots of great progressive content.
Daily Weekly     OpEdNews Newsletter
Name
Email
   (Opens new browser window)
 

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Tax the Corporations and the Rich or Take Draconian Cuts -- the Decision Is Ours

Bush Used the IRS, FBI, CIA and Secret Service to Go After Opponents -- Where Was the Fox and GOP Outrage?

GOP: Recession's Foreclosure Victims "Want a Homeless Life"

How the Trans-Pacific Partnership Gives Corporations Special Legal Rights

Busting myths that FDR prolonged Great Depression