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In the U.S., anyway, part of the motivation for states to allow riskier investing, is that the state governments aren't paying money into the pensions funds as

In the U.S., anyway, part of the motivation for states to allow riskier investing, is that the state governments aren't paying money into the pensions funds as they should. Illinois is one of the states which is worst at this; the state legislature has literally broken its own laws (without changing them) by not paying into the state pension funds as it is required to. This has been going on for years, and is more or less shrugged off. So, it's not classical "deregulation" that's the issue, because it's more fundamentally about state governments (in at least some cases) not wanting to raise taxes (or cut other spending) now, so they let pension funds invest in riskier assets to try to make up the difference. Also, the numbers you give show over a third in stocks, which have experienced drops of 50% in living memory. That would seem to be enough to cause a problem even in that case, wouldn't it?

apexalpha 7y ago
>Also, the numbers you give show over a third in stocks, which have experienced drops of 50% in living memory. That would seem to be enough to cause a problem even in that case, wouldn't it? I tried to find the 2008 report but the oldest one is 2010. Luckily it has a 5-year-earlier section: https://imgur.com/a/jFUs8bV https://imgur.com/a/jFUs8bV It's Dutch but you can see that they lost 14.5% total in 2008 and then made 14.8% return in 2009 and 10% in 2010. Since they always have fixed income bonds and cash on hand I don't think it's a problem. And in 2018 the fund had €10bn of assets. Seems to be doing great.
Godel_unicode 7y ago
> ...which have experienced drops of 50% in living memory. And those drops were immediately followed by a return to previous levels. Pension funds are in it for the long term, and has been mentioned elsewhere in the comments a decade of lower stock prices here or there isn't that big of a deal for them. Being underfunded obviously is an issue, however.
LorenPechtel 7y ago
Yup, it's the same problem you always get when you have the same people making the rules as are the ones bit by the rules. It's easier to redefine proper than pay what a proper answer costs. In practice it's almost always government that falls victim to this because in any other case the government is likely to write some rules.

apexalpha 7y ago

>Also, the numbers you give show over a third in stocks, which have experienced drops of 50% in living memory. That would seem to be enough to cause a problem even in that case, wouldn't it? I tried to find the 2008 report but the oldest one is 2010. Luckily it has a 5-year-earlier section: https://imgur.com/a/jFUs8bV https://imgur.com/a/jFUs8bV It's Dutch but you can see that they lost 14.5% total in 2008 and then made 14.8% return in 2009 and 10% in 2010. Since they always have fixed income bonds and cash on hand I don't think it's a problem. And in 2018 the fund had €10bn of assets. Seems to be doing great.

Godel_unicode 7y ago

> ...which have experienced drops of 50% in living memory. And those drops were immediately followed by a return to previous levels. Pension funds are in it for the long term, and has been mentioned elsewhere in the comments a decade of lower stock prices here or there isn't that big of a deal for them. Being underfunded obviously is an issue, however.

LorenPechtel 7y ago

Yup, it's the same problem you always get when you have the same people making the rules as are the ones bit by the rules. It's easier to redefine proper than pay what a proper answer costs. In practice it's almost always government that falls victim to this because in any other case the government is likely to write some rules.