Alternative Investment Looting Is Destroying Pension Funds

Link: https://www.forbes.com/sites/edwardsiedle/2021/05/21/alternative-investment-looting-is-destroying-pension-funds/?sh=1e71137979c1

Excerpt:

Forensic investigations in Rhode Island, North Carolina, Kentucky and Ohio reveal that gambling 30 percent or more on high-cost, high-risk, secretive alternative investments has exposed pensions to massively greater risks and reduced net returns. The time is ripe for legislators, regulators, and law enforcement to act to stop the looting.

A recent New York Times NYT -3% article revealed that putting more than half of the $62 billion Pennsylvania state teachers’ retirement fund’s assets into risky alternative investments hadn’t worked out well for the pension and had spurred an investigation by the FBI. The FBI is investigating reporting fraud—returns allegedly falsified to avoid increased worker contributions to the pension.

Law enforcement investigations into public pension funds that lie about their returns are long, long overdue.

Author(s): Edward Siedle

Publication Date: 21 May 2021

Publication Site: Forbes

Advisory committee says North Carolina should put more toward pensions

Link: https://www.montgomeryherald.com/news/article_ac128a46-7b94-11eb-b480-230aa039ee18.html

Excerpt:

North Carolina’s Debt Affordability Advisory Committee says the state should set aside $100 million a year to help the state pension systems remain solvent.

A draft released Wednesday, Feb. 24, of the committee’s 2021 debt affordability study also calls for North Carolina to maintain its 4% borrowing cap.

The committee said more money is needed to support post-employment benefits, including pensions and health care. Officials said the state’s pension systems show a $12.1 billion shortfall, while the State Health Plan is underfunded by $27.7 billion.

The committee said the state should put $100 million annually into the Unfunded Liability Solvency Reserve through fiscal 2025 to help lower that number.

Author(s): Johnny Kampis

Publication Date: 3 March 2021

Publication Site: Montgomery Herald

North Carolina Lowers Assumed Rate of Return for State Pensions to 6.5%

Link: https://www.ai-cio.com/news/north-carolina-lowers-assumed-rate-return-state-pensions-6-5/

Excerpt:

The $116 billion North Carolina Retirement Systems has lowered its assumed rate of investment return for the third time in four years, cutting it by 50 basis points (bps) to 6.5% from 7% annually.

The target return had already been reduced to 7.2% from 7.25% in 2017 and again in 2018 to 7%. Prior to then, the rates had been left unchanged for nearly six decades even though the two main state pension funds—the Teachers’ and State Employees’ Retirement System and the Local Government Employees’ Retirement System—have, on average, underperformed their assumed rates of return over the past 20 years. In fact, the new target rate of 6.5% is still higher than the fund’s estimated 20-year return of 6.28%.

Author(s): Michael Katz

Publication Date: 5 February 2021

Publication Site: ai-CIO

N.C. treasurer announces move to make state pension plan less risky for taxpayers

Link: https://www.carolinacoastonline.com/regional/article_c65c2932-6633-11eb-8288-1f1410ad3f83.html

Excerpt:

In a move that will make government-employee pensions less risky for taxpayers, N.C. Treasurer Dale Folwell announced Tuesday, Feb. 2, that the assumed rate of return on the main state retirement plan will be lowered.

Folwell and the Retirement Systems Division said the assumed rate of return for investments in the North Carolina Retirement Systems Fund will be reduced from 7% to 6.5%. The move was unanimously approved by the boards representing teachers, state employees and local government employees on Jan. 28.

Lowering the rate requires greater contributions from state and local governments, but keeps debt from piling up in the long term.

Author(s): Johnny Kampis, Carolina Journal

Publication Date: 3 February 2021

Publication Site: Carolina Coast Online