Skip to comments.Pension peril: Illinois' TRS goes higher-risk with investments
Posted on 12/20/2011 6:17:36 AM PST by george76
The Illinois Teachers' Retirement System the worst-funded major pension plan in the U.S. is pumping more of its assets into higher-risk investments while using accounting methods that some pension experts say understate its funding shortfall.
Springfield-based TRS, the state's largest pension provider, plans to allocate about a third of its $37.8-billion portfolio to alternative investments such as private-equity and hedge funds, a four-month Crain's investigation of TRS holdings and practices finds. These unconventional assets typically dangle the potential for higher returns, but only because they also carry greater risks and fees...
Gunning for bigger returns exposes the plan to the possibility of bigger losses, further jeopardizing the pensions of 362,121 former and current teachers. The system, which has just 46.5% of the assets it needs to cover promised payments to retirees, is counting on an 8.5% annual return, which many portfolio managers and investors, including Berkshire Hathaway Inc.'s Warren Buffett, say is unrealistically high. If TRS banked on a 7.75% return the rate that two other Illinois public pensions lowered their forecasts to this year its assets would equal only 43% of obligations. That would swell its shortfall to $50.1 billion from $43.5 billion.
Illinois taxpayers are already on the hook for most of the $81.3 billion in TRS' long-term obligations because the state is required to fund the lion's share of TRS benefits. That liability will keep expanding, likely at a faster rate than assets, unless fund administrators and lawmakers can make up the $43.5-billion shortfall. If the plan defaults
(Excerpt) Read more at chicagobusiness.com ...
Be sure you pick a fund that is politically connected
like they said about Jon Corzine....too big to fail
They must be getting investment advice from MF Corzine.
Hedge funds have higher fees than traditional long-only managers, but they do not, on the whole, have higher risk. Some do, but on average, most are less volatile than long-only equity managers. For instance, long only managers are required to be 100% invested in a long-only equity index, even when they expect the stock market to drop considerably. The cannot buy puts to hedge risk, or engage in other hedging activities.
This is just more GAMBLING AT THE DEMOCRAT CASINO.
“I’ll put all $5 billion of the taxpayer’s money on number 6.”
“What happens if you lose?”
“Who cares? We’ll just take some more money from the taxpayers. But if I win, it’s all mine and the taxpayers can pack sand. You never really lose at THE DEMOCRAT CASINO.”
People’s Republic of Illinois in action. I swear, my life mission over the next year or so is to get my a## out of here at the first opportunity.