US. These humble Pa. county pension plans beat PSERS’ returns by keeping it simple
Money management, according to billionaire hedge-fund managers and other high-paid practitioners, is a complex science and art. But does it really have to be?
Big state pension funds in states like Pennsylvania or California spend many hundreds of millions of dollars a year hiring many sophisticated advisers to bet on arcane strategies — multiple classes of hedge funds and private equity, real estate and debt funds — in hopes of boosting long-term profit and protecting from market downturns. Over time, returns have lagged.
A couple of Pennsylvania counties have found a simpler, better way, says Jim McMillin, elected controller of Butler County from 1994 to 2014, and an architect of that county’s pension investment strategy, which relies mostly on low-fee investments based on stock and bond indexes, from Malvern-based Vanguard Group.
Butler was “the first county in Pennsylvania to go fully indexed,” McMillin recalls. “We cut our fees by over $1 million annually, lowered our fund’s overall risk, and routinely outperformed the great majority of actively-managed funds.” Montgomery County made a similar switch starting in 2013, a break so decisive the county doesn’t report its profits from before that date.
Read more @The Philadelphia Inquirer
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