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    WhitcombrileyHamilton Nolan
    3/28/16 12:03pm

    Hamilton always acts like it is the teachers and other government employees who are losing out. It is actually the taxpayers at large, most of whom do not get a government pension, but are on the hook for the pensions promised to government workers. In Illinois, for example, the promised pensions are enshrined by the state constitution, and the state retirees get their pensions no matter what and no matter how much the taxpayers have to come up with to pay for them. And I know Hamilton will try to skew this as, "I know that, but there would be more money for better teacher salaries if not for Wall Street skimming money," but that's not what the headline or the lead statement about who the real "investors" are says. The government employees are not the ones at risk.

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      Hamilton NolanWhitcombriley
      3/28/16 12:29pm

      One of the reasons defined benefit pensions as a class are disappearing is that hitting defined benefits via investment returns is difficult. One reason it’s difficult is so much money is wasted on fees. And one reason so much money is wasted on fees is that mismanagement of pensions has put pension fund managers in the position of chasing outsized performance, pushing them into the arms of hedge funds and other expensive alternative investments.

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      PragmaticSquirrelWhitcombriley
      3/28/16 12:57pm

      Bullshit. State and local pension funds are not always “enshrined” in the local constitution. And when they are not - they are raided.

      http://www.nj.com/politics/index…

      http://www.freep.com/story/money/pe…

      And even in Illinois - they are slashing at pensions, by using them as a bargaining chip for bonuses. So workers can “voluntarily” restructure their own pension... so that they get a small raise. Or get no raise.

      https://www.wsws.org/en/articles/20…

      Wall Street’s legalized theft takes enough that these budgets would look at Lot more balanced if the vultures weren’t doing their best to vacuum up as much as they possibly can in bullshit fees.

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    highlikemeHamilton Nolan
    3/28/16 12:29pm

    It’s actually really hard to invest the vast amounts of capital these funds manage with appropriate diversification hence the need for these public fund managers to go to outside managers

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      Hamilton Nolanhighlikeme
      3/28/16 1:25pm

      Myth.

      Please see the study above.

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      brillowhighlikeme
      3/28/16 2:08pm

      Why exactly can’t a “public funds manager” do the same thing as a private one? Do the private ones have some magical ability to diversify?


      It’s an interesting hypothesis, but there is no evidence for it.

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    icanneverremembermyburnercodeHamilton Nolan
    3/28/16 12:13pm

    I’m an asshole in finance, and even I shiver at the thought of pensions investing in hedge funds. They are bullshit funds. Placing some of this in index funds is absolutely a sound strategy, but since it chases a fund I would diversify it more than that simply because of the index shits the bed so does the fund. There are still plenty of low cost options for pension fund managers to diversify the portfolio without paying exhorbitant fees you see with hedge funds. Any pension fund manager that invest in these should be taken out back and beaten. They are fucking with people’s hard earned money and there is absolutely no reason to invest in hedge funds. Fuck these people.

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      Ahemicanneverremembermyburnercode
      3/28/16 2:27pm

      I don’t believe you. You don’t sound like an asshole.

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      icanneverremembermyburnercodeAhem
      3/28/16 2:29pm

      Oh but trust me, I am. Only people with asshole tendencies even consider going into finance. Once in the industry it takes about 48 hours to go full asshole.

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    The Dread & Fear of KingsHamilton Nolan
    3/28/16 12:02pm

    I’ve said it before, but it takes the work of every cog in the machine—every link in the chain—to enable the economic meltdown that happened in 2008/2009. And that includes the ostensible victims. The little guys who blithely gave their money to be invested in instruments they don’t understand; the guy making $75,000/year who took out a $950,000 mortgage on his dream house; the pension funds who decided to “chase yield" and move into assets promising 8-10% returns instead of super safe treasuries or bonds guaranteeing half that. They are not the most important cog in the machine, not by a long stretch. But without their actions the machine doesn't work.

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      ColonialSaabThe Dread & Fear of Kings
      3/28/16 12:35pm

      I have to ask this: how is the fault of the cog who works at, say a state university - and his pension contributions end up being mismanaged?

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      PoodletimeThe Dread & Fear of Kings
      3/28/16 6:01pm

      You know, Americans are bad at money, and generally bad at math. When you read about how people with underwater mortgages got scammed by the banks, the home inspectors, the insurers and such, it really gets clear that there’s not much responsibility there. And it’s not like the instruments they were investing in were fully and honestly explained. After the meltdown, it took Bill Clinton appearing on a talk show for me to understand what had happened, and I used to work int he mutual fund business.

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    optimus_rhymeHamilton Nolan
    3/28/16 11:59am

    Oh yeah and these are the guys that are funding Hillary, these are the people shes going to owe favors to when she gets in office. Things are looking fantastic.

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      blueskyshiningoptimus_rhyme
      3/28/16 12:18pm

      EVERYBODY inevitably owes SOMEBODY

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      optimus_rhymeblueskyshining
      3/28/16 1:15pm

      Yeah thats true, but thats also the beauty of a grass roots funded campaign. You owe the people not the companies they work for.

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    GMOCHamilton Nolan
    3/28/16 12:15pm

    Now I’m all in favor of passively managed low cost ETF’s BUT 3,5 and 10 years hardly makes this a conclusive study. I point this problem out with dickwad climate change deniers who use small samples. Hedge funds sometimes do much better than the market and sometimes much worse and 10 years isn’t much of a sample size. Show me 30, 40 years or more before I draw any conclusions.

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      FeelTheBarnGMOC
      3/28/16 12:24pm

      Hamilton’s been grinding this axe for nearly a decade now, and as he’s broadly right I guess I don’t blame him, but he has never once shown any interest in that sort of nuance on the issue.

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      GMOCFeelTheBarn
      3/28/16 12:34pm

      Yeah I think that assessment is spot on.

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    AardymusVarkHamilton Nolan
    3/28/16 12:05pm

    These money managers do a thankless job day in and day out and for what? They get no respect from the average punter while working in horrible conditions so that retirees and their fellow average joe workers can enjoy the kind of financial security they never could unless they just threw darts blindfolded at a board full of blue chip stocks that never fail to provide a reliable return. Why do hate capitalism and Jesus?

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      A SPOOKY GHOST!AardymusVark
      3/28/16 12:08pm

      an extremely correct take

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    ManchuCandidateHamilton Nolan
    3/28/16 12:01pm

    I think seniors are used it. If Wall St used flashing lights and $5 buffets they’d rake in more seniors cash.

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      toothpetardManchuCandidate
      3/28/16 12:10pm
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    highlikemeHamilton Nolan
    3/28/16 12:24pm

    No need to default to index funds. A better solution is the Canadian model where government pension funds hire top investment professionals to invest directly thereby cutting out the fees. The U.S. government funds have an aversion to paying public employees anything close to market compensation, which is something that the Canadians funds will do albeit not quite Wall Street comp. If we could regulate and tax Wall Street appropriately though these kinds of jobs would look pretty good and we’d have a financial system that works better for everyone.

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      Poodletimehighlikeme
      3/28/16 5:50pm

      I’m totally with you except for the part about the public fund managers actively investing. Statistics have shown that, sadly, even the best fund managers rarely do better than an index fund over time. It’s weird but true. love your other ideas, though!

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      highlikemePoodletime
      3/28/16 6:25pm

      I’m skeptical of most active strategies as well however I think there are benefits to diversifying across asset classes. There’s also the other side of the equation, which is that our economic system depends on all types of investment to actually do business. People are too quick to equate investing with gambling which it’s definitely not.

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    PopChipsHamilton Nolan
    3/28/16 1:01pm

    [The old people represent retirees getting robbed by inefficient investing and the child represents a hopeful future in which pension funds are primarily indexed: Flickr]

    I thought the old people represented the fact that they had to babysit because mom and dad are out working their second and third jobs given the lousy economy.

    As for the kid, I thought he was simply saying, “This looks like Florida. Everyone in Florida is crazy. Please don’t let these old crazy people throw me into that canal. Somebody help me!!!!!!”

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