> Pension funds should have steady, modest gains year over year and minimize risk of dips as much as possible.
This is what hedge funds were built for - hedging.
Whoever concentrated the money in such funds was likely corrupt, otherwise grossly incompetent.
Hedge funds are a very diverse group (see my above comment about how they are defined by compensation schemes nowadays and not strategies).
The original idea of hedge funds was to provide low volatility (like bonds) and high returns (like equities).
Ideally.
But then you have things like: https://www.mercurynews.com/2016/11/01/bart-janitor-grossed-...
and look at stories here: https://hn.algolia.com/?query=pensions&sort=byPopularity&pre...
Mostly unions graciously award over time work, and other benefits to people about to retire in the last years. Since the pension benefits are based on the benefits and pay in the last years, You now have retirees drawing millions in benefits and pay.
I guess in California a lot of tax dollars already go to pay pensions then help build schools and roads.
You can't exactly pay all that big money pensions by just investing in bonds alone.
Pensions are a fine tool but they have to be funded responsibly, states liked to use them as an incentive but then refused to properly fund them banking instead on large returns. Companies did the same thing for a long time but they've been allowed to cut benefits to retirees when they run dry and have since moved on to 401ks if they offer any thing at all.
No one, no investment, no taxation can pay for something like that.
More here:
https://news.ycombinator.com/item?id=1638926
http://www.latimes.com/projects/la-me-el-monte-pensions/
https://news.ycombinator.com/item?id=14083193
>>Pensions are a fine tool but they have to be funded responsibly
And who is going to fund them? As of now California tax payers are paying for pensions. Surely this is not a sustainable way of running things?
Why not the rest of public sector employees compensation comes out of tax revenues. The only reason pensions are unsustainable now is because in order to hide the cost of pensions the budgets underfuneded pensions years ago and the funds they did allocate they assumed extremely high returns on.
You're right, it deceptively leaves out such vital information.
It also leaves out:
- how productive he actually was for each of those 80 hours
- how many workers "only" at 1.5x time were willing to take those shifts but denied because of seniority
- how much of the compensation came from the non-standard practice of letting him redeem PTO for 2x its value by applying it to week where he already worked overtime
- whether those long, hard hours actually translated into clean BART stations, or were just roundabout compensation for being physically present but ineffective
Once you have that full picture, I'm pretty sure the typical person's initial reaction will be closer to right than wrong.
Of course, hedge funds nowadays are just defined by a compensation scheme (2 and 20, though today more like 1.5 and 15).
Hedge funds are exactly the kind of investments that pension funds should have.
In all seriousness though, large pension plans have very diverse portfolios. Ontario teachers used to own 80% of the Toronto Maple Leafs. Ontario Municipal Employees Retirement System owns Oxford Properties, which owns and manages the office building I work in (and many others).
Edit: Added "Employees" to OMERS.
Maybe not over (specific) very short periods, but it depends on the mutual and it depends on the hedge fund. If you're saying pension funds should be locked in then you can't invest in anything that has exposure to equities, see: 2008, 1974, 1930.
I was just trying to nudge the post I was replying to into realisation that you either accept burning significant money to avoid risk or accept the chance of burning more money. This kind of "pensions should invest in the good guys who don't take risks..." well that's only govt bonds, and one day those will pop also.