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CalPRS financial advisors get paid well, whether the fund makes lots of money or loses lots of money.
"The California Public Employees Retirement System (CalPERS), which had more than half of its investment portfolio in the stock market, lost 36 percent during the financial crisis. Before the crisis the CalPERS fund contained $260 billion; after the crisis there was just $167 billion left. With the market rebound its back up to $240 billion, but that’s still nearly 8 percent below the peak of several years ago. The California State Teachers Retirement System has fared likewise, losing 33 percent from its $164 billion fund at the height of the market and ending up at $110 billion. It has since rebounded to $139 billion, but thats still 15 percent off its high.
A big part of the problem is that the people in charge of investing the pension funds are rewarded for risky investments with the potential to get significant returns, thereby earning a commission above their base salaries, but they aren’t punished when those risky investments take a dive. To use Buffetts analogy, its like sending a professional gambler into a Vegas casino with your retirement savings and telling him hell get a cut of everything he wins but not to worry if he loses. He might do well for a while, but don't be surprised if he eventually rolls snake eyes and your nest egg shrinks to a pea."
Oh, well. In a year or two the system will totally fail. Maybe then we will get real reform of the system? Until then, it is a gigantic waste with tinges of fraud and corruption.
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"The California Public Employees Retirement System (CalPERS), which had more than half of its investment portfolio in the stock market, lost 36 percent during the financial crisis. Before the crisis the CalPERS fund contained $260 billion; after the crisis there was just $167 billion left. With the market rebound its back up to $240 billion, but that’s still nearly 8 percent below the peak of several years ago. The California State Teachers Retirement System has fared likewise, losing 33 percent from its $164 billion fund at the height of the market and ending up at $110 billion. It has since rebounded to $139 billion, but thats still 15 percent off its high.
A big part of the problem is that the people in charge of investing the pension funds are rewarded for risky investments with the potential to get significant returns, thereby earning a commission above their base salaries, but they aren’t punished when those risky investments take a dive. To use Buffetts analogy, its like sending a professional gambler into a Vegas casino with your retirement savings and telling him hell get a cut of everything he wins but not to worry if he loses. He might do well for a while, but don't be surprised if he eventually rolls snake eyes and your nest egg shrinks to a pea."
Oh, well. In a year or two the system will totally fail. Maybe then we will get real reform of the system? Until then, it is a gigantic waste with tinges of fraud and corruption.
More...