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Other than the focus on governmental regulation we should also look at the glaring principal-agent risk. Large shareholders (such as the Swedish pension fund) s

Other than the focus on governmental regulation we should also look at the glaring principal-agent risk. Large shareholders (such as the Swedish pension fund) should have asked questions about the concentration risks and AOCI losses. Management could be loathe to realize the losses earlier due to profit targets. Their risk/reward calculation on addressing a mistake could be misaligned from the shareholders'.

jacquesm 4y ago
Pension funds - and municipalities - have no business to take the funds that they have been entrusted with outside of the country where they reside. The same kind of nonsense led to the Icesave debacle.
- henrydark 4y ago
  Is this possible for all countries? Surely the lowest gdp (maybe per capita) country in the world that has pension funds should be eligible to invest these funds outside of the country. A priori, without knowing anything about world economies, we shouldn't expect every country with pensions to even have local possibilities of investment. There's possibly a country where every single tax payer works remotely, or in local administration.
- hindsightbias 4y ago
  Freedom-oriented low-service states would seem to be too good a deal to pass up: https://www.nbcdfw.com/news/local/spanish-company-signs-50-year-for-profit-toll-road-deal/1934822/ https://www.nbcdfw.com/news/local/spanish-company-signs-50-y...
- realityking 4y ago
  Icesave was a very different problem. Iceland’s banks, trough the countries membership in the EEA, were able to offer their services in the UK and Netherlands. However when not just Icesave but 3 of their big banks collapsed around the same time their depositor guarantee mechanism lacked the funds to actually guarantee deposits. At the same time Iceland was in a credit crisis that prevented it from issuing more debt to refinance the deposit guarantee mechanism. This is a very different problem from a pension fund investing money abroad. An investment can always go to 0, which would hurt Swedish pensions but has no ramification outside Sweden. On the other hand the 2006 Icelandic bank sector was flush with foreign deposits that not even the Iclendic government could credibly guarantee deposits at the legal level. Quick side note, the Icelandic deposit guarantee at the time was only ~20k USD. Not a lot.

jacquesm 4y ago

Pension funds - and municipalities - have no business to take the funds that they have been entrusted with outside of the country where they reside. The same kind of nonsense led to the Icesave debacle.

henrydark 4y ago
Is this possible for all countries? Surely the lowest gdp (maybe per capita) country in the world that has pension funds should be eligible to invest these funds outside of the country. A priori, without knowing anything about world economies, we shouldn't expect every country with pensions to even have local possibilities of investment. There's possibly a country where every single tax payer works remotely, or in local administration.
hindsightbias 4y ago
Freedom-oriented low-service states would seem to be too good a deal to pass up: https://www.nbcdfw.com/news/local/spanish-company-signs-50-year-for-profit-toll-road-deal/1934822/ https://www.nbcdfw.com/news/local/spanish-company-signs-50-y...
realityking 4y ago
Icesave was a very different problem. Iceland’s banks, trough the countries membership in the EEA, were able to offer their services in the UK and Netherlands. However when not just Icesave but 3 of their big banks collapsed around the same time their depositor guarantee mechanism lacked the funds to actually guarantee deposits. At the same time Iceland was in a credit crisis that prevented it from issuing more debt to refinance the deposit guarantee mechanism. This is a very different problem from a pension fund investing money abroad. An investment can always go to 0, which would hurt Swedish pensions but has no ramification outside Sweden. On the other hand the 2006 Icelandic bank sector was flush with foreign deposits that not even the Iclendic government could credibly guarantee deposits at the legal level. Quick side note, the Icelandic deposit guarantee at the time was only ~20k USD. Not a lot.