still no end in sight. . . and just in time as the big 4 (i mean 3) are gonna have their hands out to cover the "legacy costs" of all their pensions as they circle the drain.

pension insurer shifted to stocks



reminds me a lot of that great this american life episode "a giant pool of money"

i don't know if simple incompetence cuts it for me here. . . it would seem that they were continuing to dump more into stocks even after their stock holdings were down 23%. seems like it was more grist for the mill to keep the Wall St fires burning.

what's amazing is that each new story like these would be getting abu ghraib-level exposure, but, in the grand scheme of this meltdown, it seems like just another drop in the bucket.

but when those stocks rebound...

edit: winky for mild sarcasm.

Have you ever heard of dollar cost averaging? Is there any inherent reason why they shouldn't have continued buying stock as the market continued to slide?

If you read the statement of the fund manager, they are $11 million underfunded. The fund is down 6.5% on the whole so its not primarily due to equity losses. It would seem he has a point in saying with fee increases rejected, he has little choice but to invest more in higher risk but higher return investments.

I don't see the controversy here. Pension funds should be invested in a variety of asset classes. Their target allocations for different asset classes don't look out of line with those of state pension funds. If they were only down 6.5% as a whole but their stock holdings are down 23% then they are still well under their target allocation for equities. Their timing may actually even be good if they continue buying. Stocks are relatively cheap now if you have a long term investment horizon.

see that's the thing, these aren't pension funds, per se. as a pension insurer they should have different investment responsibilities/strategies than the individual pensions they are tasked to cover for (an income strategy instead of a growth strategy). would you expect the FDIC to go into high risk securities?

and, as i'm a non-finance guy correct me if i'm wrong. . . doesn't dollar cost averaging assume a steady, equal investment month after month? if what i've read is to be believed the new manger went hot-and-heavy into the stock market (including high risk securities) in only a matter of months.

technically you're right that dollar cost averaging is referring to monthly fixed investments but if anyone has a big investment to make, NO one should invest it all at once. It should be dribbled into the market to try to eliminate the possibility of investing at the top of the market. I can't tell how fast they were moving into equities but the fact that their entire fund was down 6.5% and their equity investments were down 23% suggest that they had maybe ~25% in equity with a target allocation of 55% in equity. They didn't move it all into equity overnight. My point was that they should have been doing it over a period of time and continuing to buy stock as the market dropped.

I'm not going to claim to be an expert on pension insurance or insurance investment strategy. I don't think your comparison to the FDIC is a good one though. It is not backed by the full faith and credit of the federal government like the FDIC is. And as the outgoing head indicated, under current projections before any allocation changes, the pension insurance fund was inadequate to meet projected needs. If fee increases were rejected as the article indicates shouldn't the fund be looking to adopt a more growth oriented strategy to be able to meet needs. I don't know the exact allocations or investment strategies of any private insurers but I can guarantee that they invest in growth strategies as well as income strategies.

The point that the insurance fund's strategy shouldn't exactly mirror that of the pension funds they are insuring makes some sense and has some validity. Its probably overstated here though as long as the fund is well managed and a proper income strategy is maintained for near term anticipated payouts. We're talking asset classes not specific investments. The idea though that this is similar to a hurricane insurer investing in beachfront property is absurd. To the extent that the fund takes on added long term liabilities down the road from current bankruptcies, it still makes sense that portion of the portfolio that is long term invested in a growth strategy.