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Dude, they've always chased returns... It didn't magically start happening post 2008 The sub funds that Pensions invest in get rewarded according to Alpha... t

by tezza 11y ago

Dude, they've always chased returns... It didn't magically start happening post 2008 The sub funds that Pensions invest in get rewarded according to Alpha... the amount the sub fund exceeded the main stock price movement. How is that not chasing returns?? http://www.investopedia.com/terms/a/alpha.asp http://www.investopedia.com/terms/a/alpha.asp

crdoconnor 11y ago
Pension funds used to be highly invested in government bonds, which are risk-free. The risks they did take were, by and large, reasonable and minimal. They owned some shares as well, of course. They weren't taking outsized risks in order to chase an outsized gain - "chasing returns" as you put it. 2008 changed all that. Once government debt yields dropped to zero (done to save the bankers' hides), in order to still maintain the same returns which they needed, they started chasing returns. This was more done out of desperation than greed. They had made promises pre-crisis that presumed the economy would continue as normal - exactly what economists and bankers of the time promised us would happen.
- tezza 11y ago
  They're highly invested in literally everything. Again they own the shares in the companies that own other assets. They do buy government bonds as an asset class but have a diversified approach where they own FX, property etc. The only non pension funds who own anything substantial are governments. Private holdings are vanishingly small. Who do you think owned the shares in the banks that took all the risks? 99% Pension Funds. Even if the Pension Funds had 85% as Government Bonds, from the rest they still owned 99% of the banks and hedge funds and private equity.
  - crdoconnor 11y ago
    Yes, pension funds do have investments in a lot of things. Some did own banking shares, too, though banks were not 99% owned by pensioners. Holding bank shares is a suckers' game, however. Real money is made in bonuses: http://www.cbsnews.com/news/study-bank-bonuses-far-exceeded-profits/ http://www.cbsnews.com/news/study-bank-bonuses-far-exceeded-... Control is more important than holding a share certificate entitling you to a residual claim on profits.
- walshemj 11y ago
  pension funds used to invest in gilts back in the 50's your out by decades

by tezza 11y ago

crdoconnor 11y ago

Pension funds used to be highly invested in government bonds, which are risk-free. The risks they did take were, by and large, reasonable and minimal. They owned some shares as well, of course. They weren't taking outsized risks in order to chase an outsized gain - "chasing returns" as you put it. 2008 changed all that. Once government debt yields dropped to zero (done to save the bankers' hides), in order to still maintain the same returns which they needed, they started chasing returns. This was more done out of desperation than greed. They had made promises pre-crisis that presumed the economy would continue as normal - exactly what economists and bankers of the time promised us would happen.

tezza 11y ago
They're highly invested in literally everything. Again they own the shares in the companies that own other assets. They do buy government bonds as an asset class but have a diversified approach where they own FX, property etc. The only non pension funds who own anything substantial are governments. Private holdings are vanishingly small. Who do you think owned the shares in the banks that took all the risks? 99% Pension Funds. Even if the Pension Funds had 85% as Government Bonds, from the rest they still owned 99% of the banks and hedge funds and private equity.
- crdoconnor 11y ago
  Yes, pension funds do have investments in a lot of things. Some did own banking shares, too, though banks were not 99% owned by pensioners. Holding bank shares is a suckers' game, however. Real money is made in bonuses: http://www.cbsnews.com/news/study-bank-bonuses-far-exceeded-profits/ http://www.cbsnews.com/news/study-bank-bonuses-far-exceeded-... Control is more important than holding a share certificate entitling you to a residual claim on profits.
walshemj 11y ago
pension funds used to invest in gilts back in the 50's your out by decades