NYC Pension Earns $40M Over 10 Years, Pays Fund Managers $2B | Hacker News Reader

NYC Pension Earns $40M Over 10 Years, Pays Fund Managers $2B

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173 pointsarielm88 comments

It's what has become of capitalism. First there were producers, they sold what they created themselves and made a profit. Then there were merchants who bought and sold and made a profit on the difference. Then investors who invested in merchants and made a profit by collecting interest on lended money. Nowadays, it's the fourth level of capitalists, the fund owners, who takes peoples money and invest it into investors who then invests it into merchants.

A common scam is to email 10000 people betting picks. To half of them you predict that team A will win and to the other half that instead team B will win. Repeat the process with the ones who got the right picks and after a few iterations you have a small group of gullible people who think you have supernatural sport prediction abilities.

Fund managers do the same thing all the time. They have a portfolio of funds, some of which purely due to chance will not beat their market line and will then be folded into those who did. Then new funds are started to fill the void. This way, almost every fund can appear to beat the market average.

That's just one of the many tricks available to fund managers. Another is choosing the right index to compare your fund against and selecting which time period puts it in the most favorable light. Maybe the performance over the last three years were extra strong or maybe it had a dip so let's compare over the last seven years instead?

The worst thing is that you can't abstain from playing the game. Your retirement money is on the stock market and fund managers will take a big slice of it in fees whether you like it or not.

> The worst thing is that you can't abstain from playing the game. Your retirement money is on the stock market and fund managers will take a big slice of it in fees whether you like it or not.

What are you talking about? There has never been a time where investing was cheaper and there were more options to invest without a fund manager getting a slice.

If you want to discount your pension benefit because you don't control the asset allocation (and I think you should, but that is an opinion) that is fine, but it isn't some sort of "rigged game" that you don't have options in.

The average 401k plan is a bag of crap, with lots of high cost, low performing investment options.

I'd love to see your source about the "average" on 401k plans. I've worked under so many 401k regimes I can't count them any more and have seen some bad ones. That said, there is normally at least 1 passive fund/etf in the mix even in the worst plans.

Further, 401k plans are easy to change. Make your displeasure with them known to HR (who frequently don't understand that the plan they have put together is bad) or discount the benefit accordingly when evaluating your compensation and invest outside of the plan in the ways you want.

I agree and disagree. I'm a reasonably savvy investor, this stuff isn't really an issue for me.

But most people aren't, and there is no evidence that they magically become good disciplined investors in the foreseeable future. The point is the employees in general are poor at investing and planning, and the 401k lowers the resistance level and gets people to invest. A poorly structured plan isn't an issue for you and me, but it for many (I would argue the majority) workers.

But there is also very little evidence (and quite a bit of counter evidence) that abdicating the investing and planning of these things to pension fund managers works out.

Don't know about that. Leaving investments up to individuals results in a lot of individuals investing exactly $0 towards retirement. By providing an incentive to save, even a 401k that provides negative returns will leave them with a retirement fund greater than zero.

In cases where the investment fund is actually funded, and not raided by the business to meet cash shortfalls in the business or enrich corporate acquirers, things can work out well.

For example, the NYS Employee Pension fund is typically 90+% funded during any given year. That's because the law requires (quite onerous) funding contributions that spike when markets underperform, and makes it difficult to take money out.

That doesn't mean that NYS is perfect (far from perfect -- a few years ago the sole trustee of the fund was convicted of corruption relating to investments). But it is in a much better position than a state like Illinois, which is only 40-50% funded for future obligations, or New Jersey, where the budget is balanced by "skipping" annual contributions.

And If I want to move to a different school system to teach before I'm vested? How do they pay out?

Take a look at Paychexonline and let me know when you find a "good" passive ETF that isn't charging above 1.5-2%

At a place I've worked at, the expense ratio was x10 compared to equivalent funds on the market. For example VTI had a 0.05% expense ratio while their S&P500 fund, the lowest expense ratio fund they had, was %0.5.

I asked HR multiple times if we could switch from 'great west retirement services' (now empower retirement) to something like schwab, fidelity or vanguard where the expense ratios are far lower. They never changed because it was cheaper for the company to stay on with GWRS than it would be with schwab for example.

So these crappy 401k services offer a cheap price to the company so they can make it up + more through their high expense ratio through the employees.

I would never argue that there aren't bad 401k plans. But you are not forced to use them and the market offers alternatives.

Those alternatives may be influenced by a lot of other factors such as regulatory environments (the 401k/IRA contribution difference is baffling) or your employers decisions.

But you can price that into your benefit evaluation. "You have a bad 401k plan, normally I'd take X in salary compensation, but you need to provide me X+Y". You do this when comparing health benefits right? Why wouldn't you do this for retirement benefits?

The op was claiming that he had no choice but to use high fee options, and he later qualified that with regulation based in Sweden which made that largely true. In the US, it is not true, for better or worse it can be inconvenient to use low cost providers, but you aren't forced into it.

Most of us doesn't have any disposable income to directly invest. Instead we have indirectly become investors thanks to the part of the salary set aside for us in the form of taxes and payments to pension plans. I don't have the numbers, and it differs from country to country, but it's a huge chunk of your salary. Like ~20% of your gross income is used to finance your retirement because you might live several decades after you retire.

The Swedish system (totally simplifying here) works so that once a year you get to allocate about half your tax collected savings to a list of funds selected by some government officials. Another part of your pension if paid by your employer through a pension broker and again you can select among a list of approved funds. All of the funds you can choose from charges a hefty fee to manage your capital.

Had I had the choice I would have withdrawn all my money and paid of my home loans which would have given me a completely risk free return of 3%/year. Instead I can only choose among these funds whose fund managers managed to grease some government official enough to put them on their approved list.

In that specific case, you do seem to be trapped, and I too would be frustrated about that, but it seems like you have the trapper wrong. The financial markets are providing the cheapest investment options ever, but your representative government is taking that away from you.

I'm not even willing to say that is a net bad thing (there may be all manner of benefits that come along with it), but place the blame where it belongs.

So you are blaming the fund managers for your government's problems?

This is why I detest all forms of social security/pensions. The government is not smarter than the individual. It's my money, not the government's. I don't need some elected or appointed official to be in charge of my investments. In the U.S., the government can't even balance a budget; something I do every month.

It's worth mentioning here, that since the money is effectively trapped in the mandatory Swedish Pension System (It's basically a locked US 401k with mandatory installments done through Pay As You Earn, ie. done automatically) the Swedish Pension Fund Board, who oversees the system - have negotiated brutal Fund Fee savings for each fund. Some of the mutual funds are almost free from fees.

>It's what has become of capitalism.

How is this a problem with capitalism? The problem is with centrally controlled public sector employee pensions, which has ALWAYS been rife with fraud and corruption as unions and municipal politicians all want a cut of that pie.

In a more "ownership society" solution, you take your 401k where you want to. You choose your investments, risk level, etc. Its certainly not perfect (sometimes some groups have high fees but you should be able to switch providers), but the larger issue here is how messed up big city pensions are. In Chicago, the city is going to go bankrupt next month if it can't find huge and new levels of funding/taxation. It has promised so much in pensions it can't remotely pay for via politicking and union corruption, that the taxpayers are shocked at how badly everything has been managed.

The larger issue is that the 60's and 70's radical leftist politics have come to roost. We handed unions and public sector workers the keys to the kingdom and now we just can't pay for it as they retire. Its not just fees and its not just Chicago, its going to be a lot of municipalities where pensions are going to do serious damage.

Capitalism has become incredibly abstract. You make a deposit of €1000 to your retirement account containing €10000 and hopefully, in a few years, due to investments the number will be larger than €11000. But I don't think anyone can trace exactly what happens with the money or what chain of middle men they go through before they come back at you with some profit.

Btw, "pension funds" are just an elaborate illusion. What you pay today funds this generation of pensioners. It's not money doing nothing in a bank account. We hope that the working generation coming after us will be nice enough to pay taxes to fund us after we have retired.

Surplus tax income used to be used by governments to build infrastructure, schools and housing. Building highways is a form of safe, long-term, high-yield investments. It's almost always profitable but it may take many decades before it becomes so. Nowadays, much less of the surplus is used for that kind of direct investments and we are instead giving it to fund managers and hoping that they will work their magic and give us back more money in the future.

Hedge funds are not about returns. They're about hedging risk. Thus, hedge funds. The original purpose of hedge funds was to allow investors to decouple themselves from traditional sources of risk (stock market plunges, housing market crashes, etc. etc.) and diversify their assets in a way that would normalize returns and make things at worst more predictable, and at best stable and predictable. This is also why they enjoy lax regulation, as they often don't invest in traditional methods or securities (or at least they did, things have changed somewhat).

Granted, that hasn't been the MO of every hedge fund ever created, but that is the fundamental point of a hedge fund. Framing the debate by saying "they don't even beat index funds and get paid billions" ignores the reality that investing in a way that diversifies risk is an extremely difficult thing to do, and even if a fund loses money it can still technically succeed at it's purpose and have earned it's commission.

I'm starting the fifth level: investing in the fund managers.

I'll be honest and admit this is one area where hedge funds do get gready.

Most funds work on a model of 2 and 20, meaning they take 2% of assets they manage to run the fund and then take 20% of the profits as their compensation.

This works when you manage 100 million as the 2% can cover most costs, but gets absurd when you manage 100 billion. In cases like this the 2% gets absurdly big and you just can't hire enough people or buy enough tech to eat up this money. It becomes free profit, and that is borderline abuse.

The idea with hedge funds originally was, we think we can beat the market and we only get paid when we do, out of the 20% of profits that we take. Essentially we are betting on ourselves and we eat only when we do well,

With 2% of 100 billion, it turns out you get paid no matter how well you do. Venture capital funds are equally bad in this regard:(

Pension funds need to be better about negotiation fees.

EDIT Someone asked me what to look for when investing in a hedge fund.

There are really only 3 things:

1) fees, 2 and 20 is standard and if you are investing a "small" amount, less than 20 million, you should expect to pay this.

2) lock up time. Generally you should be able to redeem at the end of any month with 20 days notice, ie if you want to redeem for May 1st, you need to inform them by April 10th. No fund should be able to lock your money up for more than a month, though some will try.

There is an exception for this in funds that by definition invest in illiquid assets, such as venture capital or real estate that can take a year or more to mature, but even then 90 days is absolute max you should tolerate. ie if a VC tells you you are locked up for 5 years, and some will, you should tell them thank you and move on.

3) track record. Don't invest in any hedge fund less than 5 years old, unless you have special knowledge or a healthy risk appetite. Its just not worth giving someone else the chance on your dime. Most new funds are started by people leaving a fund and if they are good they get seeded by their previous fund, friends and family. Make them prove themselves before you put yoru money into them.

4) If you're investing any "small" amount, don't invest it in a hedge fund. Invest it in a passively managed (index) fund. I pay .3% a year on my assets and get market returns.

Move over to Vanguard. I pay 0.05% for American stock index funds. In fact, all of their various stock index funds are less than 0.3%.

Put you still end up paying around 0.2%-0.4% in platform costs. Or is this different in the US?

The most expensive ETF I use in vanguard is %0.15. Past the expense ratio for the ETFs I pay no fees.

Another point is that after fees almost no funds consistently beat VWAP; and for the ones that do you'll either not be invited to invest in it, or it will turn out to be a Madoff. The take away being if you are investing in "normal" equity investment funds at less than $1B invest in index funds, preferably mutual index funds.

> Another point is that after fees almost no funds consistently beat VWAP

VWAP doesn't mean whatever you think it means.

VWAP means volume weighted average price. Admittedly in this case I am using the phrase in very very broad terms; to spell it out, very very few managed funds can consistently buy at a lower price than the market as a whole (on any given day, VWAP, as opposed to the opening or closing price which is what is normally published) and consistently sell at a higher price than the market (and hence consistently out perform the market). Once you factor in fees and an outlook of 10+ years the number of funds essentially drops to zero, and most often they give returns below the market average; better to get a return that matches the market, indexed funds, and with very low fees, a mutual index fund.

> VWAP means volume weighted average price. Admittedly in this case I am using the phrase in very very broad terms; to spell it out, very very few managed funds can consistently buy at a lower price than the market as a whole and consistently sell at a higher price than the market (and hence consistently out perform the market). Once you factor in fees and an outlook of 10+ years the number of funds essentially drops to zero, and most often they give returns below the market average; better to get a return that matches the market, indexed funds, and with very low fees, a mutual index fund.

Unless you are a market maker that isn't how investing works: You are trying to sell higher than you bought in at, not higher than the currently quoted price.

The fund in the article is clearly not using 2 and 20.

I don't have a big issue with 2 and 20. It is the prerogative of both parties in the contract to come up with a more reasonable number for mega-funds.

The issue with this fund is graft and corruption.

If this fund were using 2 and 20 that 2 billion number would be higher - in fact, it would be 15 times higher (160 billion * .02 points * 10 years), and that's not including the 20% fee on gains.

2 and 20 is a sucker's deal. Stay out of hedge funds if possible.

Dont they have to give back the two when they take the 20 though ?

I would also add a condition that the person running the hedge fund has a large portion of his own personal wealth tied up in the fund. Skin in the game is probably the best kind risk management.

Not necessarily. People are often overly optimistic.

> Most funds work on a model of 2 and 20, meaning they take 2% of assets they manage to run the fund and then take 20% of the profits as their compensation.

Surely they also deduce 20% of any losses from the 2% fee? /s

Virtually no VCs or private equity funds have anything less than a 10 year lockup. Those vehicles can't realistically function without long-term committed capital.

I'm surprised that 2 and 20 isn't on a progressive scale. 2 and 20 for the first 20mm, then 1 and 20 for the next 20mm and to keep on reducing the first part of the % point until it's 0 and 20.

Can someone clarify this? Because the article explains:

> "Over the last 10 years, the return on those “public asset classes” has surpassed expectations by more than $2 billion, according to the comptroller’s analysis. But nearly all of that extra gain — about 97 percent — has been eaten up by management fees, leaving just $40 million for the retirees, it found."

Note "surpassed expectations" in there. That makes it sound not like the total return was $2B but that the return was $2B above projections, and after fees this was functionally erased leaving return at projected level. Am I misunderstanding the language here?

My read is that the fund managers created an additional $2B in exceeded expectation/value, then billed 97% of that created value. In other words, stay home, don't use these guys, don't pay them $2B, get the same returns. That's how I understand the point.

Yeah that's how I'm reading it but then I guess the question then becomes whether the projections were made specifically with a hedge fund strategy in mind or if they would have been the same for a more conventional investment approach.

I'm not trying to discount the take-away that the fees are very high regardless of the projection basis, but I think it's important to understand the difference. If these criticisms are not clearly reasoned or communicated, I think that fuels the perception in the financial community that these complaints are hysterical and unfounded and should be dismissed.

There's no guarantee that using other managers would have resulted in the same "expected" returns.

It also makes it sound like the entire fund value was reduced to "just $40 million".

Primary source: https://comptroller.nyc.gov/newsroom/comptroller-stringer-bi...

The wording of both primary and secondary sources doesn't make the facts uncovered by the analysis particularly clear, IMO. Based on my reading, these are the facts:

* Managers of public investments (public stocks, bonds, etc) outperformed their benchmarks by at least $2.1 billion before fees, and charged at least $2 billion in fees. Fees were at least 95% of excess returns, but less than 100%.

* Managers of hedge funds, private equity funds, and real estate investments underperformed their benchmarks after fees by $2.6 billion. Amount of fees is not stated.

That's the way I read it, heaven forbid they provide the actual report.

Also, if we assume 80% of the $160 billion is in public investments that achieved their benchmarks net of fees over the past 10 years $2b in fees seems pretty reasonable at 0.16% ((2 billion /10 years)/(160*.8))

The question which isn’t answered in the article is: how would the fund have done if passively invested in the market? If the market lost money over the same time period, then although extremely high, the fees are a relatively "good deal" (since the fund was up $40M, and the alternative would be losing money). If they’re talking about the last 10 years however, it looks like the market should have returned about 70%, which makes the fund manager's performance look even worse.

S&P 500 returned about 92.09% from 2004 - 2014.

They referenced it being a 160 billion dollar fund so they really should have been looking at returns of closer to 100 billion...

http://ycharts.com/indicators/sandp_500_total_return_annual

*although if all large pensions/trusts/endowments were passively invested in the market, some of these financial companies on the s&p list would not have been able to steal so much from pensions so i'm wondering what type of effect that would have had on total market returns

Not that it impacts the heart of your comment, but that is not risk adjusted returns. To get that exact return you'd have to have 100% allocation in the s&p 500, which would also be cause for articles...

Nice try. $SPX is not where you want $160bn of pension money. 10% maybe, with similar investments in treasuries, commodities, cash, etc.

I somehow got downvoted for pointing this out yesterday, but with target return rates of 7-8%, pensions can't invest in what most of us would consider a prudent portfolio. At least not in a low inflation environment (since targets seem to all be nominal rather than real).

While I would agree that a pension fund shouldn't be in all equities (or investment with similar risk profiles) if the fund managers are mandated to target 7.5% returns its hard to see how they can include a sizable cash or treasury component and expect to hit that.

Leverage

That is true but there are safe investment avenues that should be returning more than .025% over 10 years (40 mil / 160 bil).

Here's the original story: http://mobile.nytimes.com/2015/04/09/nyregion/wall-street-fe...

Non mobile version : http://www.nytimes.com/2015/04/09/nyregion/wall-street-fees-...

Related: The best study I'm aware of that attempts to estimate the distribution of fund manager skills is this one by Fama and French (of 3 factor model fame) from 2009: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1356021

You are missing the wood for the trees.

The real skill is collecting 2.5 billion in fees, for essentially no value added.

My county recently changed to using a passive investment strategy for pensions and there is a push for the whole state of PA to change to a similar model.

http://www.philly.com/philly/opinion/inquirer/20150301_Follo...

These results actually make sense. The 10 year period covered a tumultuous time in our economy. When the market drops 20%, no fees are paid, but no breaks on future fees are offered either. So let's say they start with $100 billion. The fund loses 20% one year, then rebounds exactly 20% the next. If charging 20% of profits, $4 billion in fees are paid on the $20 billion "gain," even though investors made nothing. They've actually had a net loss of $4 billion after paying fees on their "gains".

That is primarily why these numbers seems so ridiculous - the market had a few bad years, and then came back around. The people in charge of deploying this money should negotiate better terms, like paying fees only on net returns over longer periods of time (5 years instead of one year, for example). At the end of the day, it's their own fault for cutting lousy deals. $160 billion gives you a pretty big bargaining chip on fees.

This is why I think people are too quick to dismiss market fluctuations as "noise". As long as there's money to be made from the instability, those ups and downs are signal, not noise.

> At the end of the day, it's their own fault for cutting lousy deals.

Victim blaming. Well done.

It would not be surprising if there was a bit of corruption involved in picking the managers, setting the fees, the whole process.

Isn't the blame falling to the pension managers who picked the hedge fund, and the victims are the individual pensioners who each have negligible influence over decisions? Or am I misunderstanding something?

Oh please. If you're in charge of $160 billion, you better be one of the most sophisticated investors on the planet, and wield your extraordinary power to achieve the greatest returns for your stakeholders. Those fee agreements are clear as day. They should know precisely what can happen if they choose to pay fees on yearly gains instead of on net gains from inception.

Stupid people aren't victims; they're just stupid. The bankers had a responsibility to their shareholders to ask for the highest fees possible, and the managers of the $160 billion had a responsibility to say no. Looks like the bankers did their job.

Well said. Honestly.

So, let's play out the theories:

1) The pension managers WERE some of the most sophisticated investors on the planet.

So what the hell happened? You originally called them "irresponsible." Now you've edited to call them "stupid." What's your theory about what happened to these world-class investors? My point being, they can't simultaneously be in the "most sophisticated" class, and also in the "irresponsible" / "stupid" class.

Kickbacks? Got overly greedy and mis-fired? It could happen to literally anyone? Bad luck?

2) The pension managers WERE NOT some of the most sophisticated investors on the planet.

I agree with your assessment that they SHOULD HAVE BEEN. So what the hell happened? Did they lie when they were hired? Did they have a great track record (luck?), but flubbed this? Or did the person who hired them and put them in charge (the mayor?) trust someone they shouldn't have?

The real victims are the pensioners, and this story should be investigated. If not on their behalf, then as a lesson for other pensioners, pension managers, and the people who manage pension managers.

I edited it because "irresponsible" wasn't strong enough in this case. What they did was idiotic. I think they were on the stupid side...with this kind of money floating around, any hint of kickbacks or corruption would quickly float to the surface. I'm sure that the funds they invested in were run by world class investors, but the pension manager(s) simply didn't understand the implications of the fee agreement.

Again, they can't simultaneously be in the "most sophisticated" class, and "idiotic."

Unless your assertion is "even the most sophisticated investors can be idiotic."

I'd say "idiotic" should be upgraded to "colossally idiotic." $40M earnings on $160B in 10 years?

So, what do you think?

I don't think that the pension managers were sophisticated, but rather were idiots. They went to world class bankers to deal with the money, who did a world class job of creating an awesome fee structure for themselves.

So then who put idiots in charge of a $160B pension? And why did they do it?

Not expecting an answer from you - I'm saying these become the questions I want answers to.

> The people in charge of deploying this money should negotiate better terms

Indeed. Yet even those people are making good incomes for horrible decisions. As the author said, even his kid's 529 outperforms this nonsense. Making money when the market is up (over the period under discussion) should be a given. That it's not means everyone involved should be fired.

This is why pension funds should not be treated as "sophisticated investors", allowed to invest with unregulated hedge funds. The overall performance of the hedge fund industry is on a par with the results here. Most of the returns go to the fund managers. Why anybody invests with those clowns is unclear.

Pension funds, as a class, cannot beat the market. They are the market. They should be in index funds and bond funds with very low management fees.

They should've used Vanguard. ;)

Sooner or later, investors will wisen up to the fact that hedge funds are not an asset class; they are a compensation scheme.

Who makes the decision to put pension funds into hedge funds anyway? This is just filtering away money from poor people, who would have seen better returns from an index fund. Disgusting and obscene.

> Who makes the decision to put pension funds into hedge funds anyway?

Pension fund managers. They are often also well compensated for this decision making process. Many, many hedge funds and ibanks spend as much time/energy courting pension fund managers as they do generating returns.

This is because the customers of the pension (the people that will want the benefit) are largely a captive market and are frequently unsophisticated financially. Its one of the many reasons I will not take a job that uses pensions as a benefit (and am baffled when unions fight so hard to keep them).

Public unions like pensions because they are defined benefit plans and are guaranteed a specific monthly benefit. The risk is passed to the tax payers because they need to cover any poor investments.

Let me rephrase. I don't understand why union members feel comfortable trusting a large portion of their employment benefits to the whims of the legislatures or much more rarely now, private companies, that "garauntee" them, nor to the capabilities of the pension manager. The downside of lack of mobility, lack of choice, and poor performance all seem like they would be deal breakers to me, but again, I've never worked in a pension system.

Defined benefit plans can of course be had without using a pension so that seems a red herring.

This article is pretty garbled. Matt Levine is, as usual, excellent: http://www.bloombergview.com/articles/2015-04-09/new-york-di...

The New York Times article seems to be talking about the extra gain, which I presume means gain in addition to beating the benchmark. Here's the quote:

"Over the last 10 years, the return on those “public asset classes” has surpassed expectations by more than $2 billion, according to the comptroller’s analysis. But nearly all of that extra gain — about 97 percent — has been eaten up by management fees".

I read this as meaning that the extra gain meaning gain minus benchmark gain was $2B and most of it was eaten by fees (which is still bad, but not as bad as the article and its title seem to suggest).

I don't think that's correct. For example, the article says

Until now, Mr. Stringer said, the pension funds have reported the performance of many of their investments before taking the fees paid to money managers into account. After factoring in those fees, his staff found that they had dragged the overall returns $2.5 billion below expectations over the last 10 years.

There appear to be two uses for the word "expectations" here, for two different things. There was the original expectation that the fund manager promised, that was exceeded. Then there's the expectation of what NYC would be able to withdraw, which failed to account for fees.

Expectation A: Fund value will be X. Reality: Fund value is X + 2b.

Expectation B: NYC can cash a check for X + 2b. Reality: NYC only gets X + 40m.

The reporting isn't very clear, IMO.

Agree. Reporter did a poor job. I would think the expectation should be the relevant benchmark, meaning, passive portfolio like Vanguard invested in similar proportions of stocks and bonds.

Isn't this true of most actively managed funds?

This is why I believe people who think you can just sock money into a "low cost index fund" and never think twice about it are misguided. Even if you end up with most of your money in said low-cost index fund, it's important to be engaged, informed and educated.

How so? The article shows how NOT using an index fund hurts.

Rather, I think the article is showing us how not being informed hurts. It took them 10 years to understand what was happening with their money? Unacceptable.

Learning how investing works, breaking out of the pie-chart bs sent to you in your nice quarterly statements and really understanding how your money is invested.... Like i said, I don't have an opinion on where you put your money but I think the idea that you can hand it over and never think twice because you're in a low-cost fund is misguided.

low cost index funds are passively managed. there's nothing to be informed or educated or engaged about other than having an opinion about the general market. not sure what your point is here.

If your idea of good financial planning is just putting all your money into $SPY and $QQQ and keeping it there until you need to start withdrawing from it, I fear you're on a dangerous path. Acting as if the only decision is the right and pure choice of total index-fund investment and it all just works out after that is, I believe, wrong.

Finance, how the markets work, things of this nature.. we do a poor job of educating people about it. The pension fund outsourced the job of understanding their investments, and I fear people do the same.

Of course, this is controversial because... you know... knowledge is power, except finance, you can't know jack about finance... or something?

This translates to net annual return of 0.0025% :)

If they had simply used a dart board or other randomized device, I bet they would have made the same $40M but saved the $2B.

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