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Pension funds spend $trillions on investments. They have a lot of power to incentivize corporate behavior, in either a responsible or irresponsible direction. I

by _qulr 6y ago

Pension funds spend $trillions on investments. They have a lot of power to incentivize corporate behavior, in either a responsible or irresponsible direction. It seems to me that pension funds have been enablers of irresponsible corporate debt stockpiling. Pension funds had a choice, and I'm not sure they chose wisely.

em500 6y ago
Not sure what you're suggesting here concretely, or how you imagine pension funds actually work. Asset managers at pension funds need to make some target returns on their part of the portfolio (say 5% on high-yield corporate bonds). They're just mundane desk jobs, buying and selling contracts on computer screens. We're not talking about people playing golf with the CFO of Boeing or anything like that. What kind of incentivizing responsible behavior would you imagine them doing? Yields on all debts have been structurally declining for more than three decades now. So all asset managers find themself forced to buy riskier and riskier debt at higher and higher prices (= lower and lower interest rates). If they don't, they need to tell their clients to expect lower returns / save a lot more for retirement, risking the clients taking their money to other asset managers promising higher returns.
- _qulr 6y ago
  > Asset managers at pension funds need to make some target returns on their part of the portfolio (say 5% on high-yield corporate bonds). They're just mundane desk jobs, buying and selling contracts on computer screens. This may be precisely the problem. Pension funds have an oversized influence on our whole economy. They deserve much more care and scrutiny than this. > risking the clients taking their money to other asset managers promising higher returns. Not sure I agree with this. Pensions aren't operating in a competitive market, they're typically associated with a particular employer, acting on behalf of the employees.
  - em500 6y ago
    > This may be precisely the problem. Pension funds have an oversized influence on our whole economy. They deserve much more care and scrutiny than this. I completely agree on the abstract level, but I have no clue how to get anything actionable out of that. > Pensions aren't operating in a competitive market, they're typically associated with a particular employer, acting on behalf of the employees. The funds as institutions probably aren't, but the specific asset managers tasked with the implementation, either directly employed or contracted by the funds, certainly are operating in competitive markets.

by _qulr 6y ago

em500 6y ago

Not sure what you're suggesting here concretely, or how you imagine pension funds actually work. Asset managers at pension funds need to make some target returns on their part of the portfolio (say 5% on high-yield corporate bonds). They're just mundane desk jobs, buying and selling contracts on computer screens. We're not talking about people playing golf with the CFO of Boeing or anything like that. What kind of incentivizing responsible behavior would you imagine them doing? Yields on all debts have been structurally declining for more than three decades now. So all asset managers find themself forced to buy riskier and riskier debt at higher and higher prices (= lower and lower interest rates). If they don't, they need to tell their clients to expect lower returns / save a lot more for retirement, risking the clients taking their money to other asset managers promising higher returns.

_qulr 6y ago
> Asset managers at pension funds need to make some target returns on their part of the portfolio (say 5% on high-yield corporate bonds). They're just mundane desk jobs, buying and selling contracts on computer screens. This may be precisely the problem. Pension funds have an oversized influence on our whole economy. They deserve much more care and scrutiny than this. > risking the clients taking their money to other asset managers promising higher returns. Not sure I agree with this. Pensions aren't operating in a competitive market, they're typically associated with a particular employer, acting on behalf of the employees.
- em500 6y ago
  > This may be precisely the problem. Pension funds have an oversized influence on our whole economy. They deserve much more care and scrutiny than this. I completely agree on the abstract level, but I have no clue how to get anything actionable out of that. > Pensions aren't operating in a competitive market, they're typically associated with a particular employer, acting on behalf of the employees. The funds as institutions probably aren't, but the specific asset managers tasked with the implementation, either directly employed or contracted by the funds, certainly are operating in competitive markets.