Skip to comments.State Pension Funds Down 59% On Private Equity Bets
Posted on 08/20/2009 5:09:38 PM PDT by FromLoriEdited on 08/20/2009 5:16:27 PM PDT by Admin Moderator. [history]
Ah, the good old days, when diversification meant splitting your money between levered instruments (securities), somewhat levered and less liquid assets (like timber and commodities) and extremely levered investments (like private equity).
That kind of diversification didn't work out so well, when everything collapsed at the same time -- those most-leveraged positions got crushed.
(Excerpt) Read more at businessinsider.com ...
The good news is that less than 100% of their money went to private equity.
The bad news is that if you factor in inflation, the money invested with private equity is probably down 75%.
LOL! Is there a bigger pic of that?
Sad thing is, many of these are defined benefit plans and not simple thrift savings plans. This means that the taxpayers must contribute more to make up the losses so the end benefit is still the same.
In Pennsylvania, the losses on the teachers retirement funds were so great that the average actuarially computed required contribution is 26% of teachers salaries. Our slick gov needed to support the teachers who elected him so about half of our state’s $18 billion stimulus money is going to the teacher’s pensions. Doesn’t that stimulate the economy! sarcasm intended!
Yep, and the next cycle will come along where PE is very profitable, but the public funds will stay on the sidelines while private investors gain, until the peak of that cycle—when the public funds once again jump in late.
You can size it on your computer I figured it out on mine.