At least one of Illinois’s big public employee pension funds, the Teachers Retirement System (TRS), which covers all Illinois public school teachers except Chicago’s, claims to be getting more than 8% return on its investments. IMO under present conditions that means as one regular commenter here would put it they’re “climbing the risk ladder”.
Risk means a higher potential for loss and pursuing riskier investments in pursuit of yield means that sometimes you’re going to lose. What happens when the TRS loses some of its risky bets?
Convenient return data everyone should post on their refrigerator….
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
Either they are conveniently selecting measurement periods, which is called deception, or grossly overweighted in equities, including alternatives, which is called breach of fiduciary duty. Or both.
Result? Higher risk of loss, or risk of temporarily depressed valuation when redemption needs occur, which is effectively the same thing. Pensioners are not accredited investors making voluntary choices. This is not my stock-in-trade hyperbole – The fund managers are charlatans of the Enron variety. Where’s Bernie? Must not be as many votes in criticizing “greedy” pols and incompetent government as in criticizing “greedy” corporations.
Yeah, I honestly don’t see how they’re getting an 8% return without being mostly in stocks which doesn’t sound like the right balance to me.
Are you sure of that number? Looking over TRS press releases and their CAFR shows a 4% return for 2015. I noticed they claim a 3 year return of 8.3%
If they are claiming a current 8+% rate of return, when the ball lands flat, we know who will pick up the tab.
“There is nothing as certain as death and taxes” is an age-old adage. Apparently, in the relatively new age of pensions, “defined benefit pension” can be added, because no matter the risk of investment, the state of the economy, those pensions are cemented into place, and it’s the tax payer safety net who ultimately takes the brunt of securing these benefits forever. In fact, an asteroid could hit the planet, and expectations of satisfying these union contracts would still be legally enforceable.
IIRC to meet their solvency requirements they need a 7% annual return. Reporting 8.3% cumulative over a three year period when you need 7% annual is deceptive.
But of course, however kick the can until the next election as worked since at least 1954.
For S&G value, read the Pension Benefit Guarantee Corp’s most recent projections report, net deficits are expected there for the next 10 years.
Past performance does not guarantee future results.