The reason for this, beside the typical mix of corruption and de facto kickbacks, is that without high yields there will be no money to pay the upcoming tidal wave of public sector retirees. Calpers has an unusually high investment return target of 7.75 percent, and has increased its stakes in venture capital, hedge funds, and private equity. The situation is not pretty: it hit a peak value of $260 billion in October of 2007, fell to $160 billion, and now sits at around $200 billion.
The safest 'retirement' fund is Social Security, simply because almost everyone is vested. The more specialized a fund, the more it can separated from the concerns of the general population. Calpers retirement packages can presented as the benefits of sour DMV workers (never mind police and firefighters) - i.e., someone else, which makes it politically vulnerable to deep cuts in the coming years.
1"Laying on bets at America's biggest pension fund" - Reuters; Christie, Ablan, Henderson
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