Watch What Indexing Does for Public Pensions
The unfunded liabilities of public pensions are out of control across the country. My state, Illinois, is the most severe case, with only 40 percent of those liabilities funded.
Given the magnitude of the problem, and the political and legal obstacles to fixing it, it remains tempting to underplay the importance of straightforward financial changes that could put the funds on much more solid ground. Worsening the problems of public pension systems nationwide is that they have proved to be poor investors. Standard and Poor’s recently released a study showing that about 75 percent of pension funds’ vehicle of choice — actively managed portfolios — underperformed their benchmarks.
Hundreds of billions of dollars have been poured into wildly expensive hedge funds with little understanding and abysmal results. That has proved to be a colossal mistake — one that some states have been trying to rectify in the last few years.
Read More: HERE
