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OPS Pension Fund $771M Short After Odd Investments


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As the nation fell deep into the Great Recession in 2008, Omaha’s Warren Buffett urged calm, assuring Americans that blue-chip companies’ plunging stocks were sure to eventually ride high again.

 

But the trustees and administrator overseeing the Omaha Public Schools’ pension fund didn’t listen to the hometown investment sage.

They bailed heavily on the stock market. Then they put most of the pension fund’s assets into a growing list of nontraditional, often speculative, investment alternatives — among them real estate in Mumbai, India; international shipping; Ukrainian agriculture; oil companies in Kazakhstan and Brazil; timberlands in Tennessee; distressed housing in Florida, New Jersey and Nevada, and more.

 

And in the process, they transformed one of the nation’s best-performing pension funds into one of the worst.

 

Not only did the pension fund largely miss the stock market’s strong rebound, but the trustees also did a poor job of choosing the new investments, with many actually losing money.

 

OWH

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OPS slashed its budget by some $30 million, $19 million of which was directly due to the payments required to shore up the pension fund. With future catch-up payments set to escalate, more budget cuts, a tax increase for OPS residents, cuts in benefits to future teachers and increased draws from the paychecks of current teachers could all be on the table.

 

:facepalm:

 

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There needs to be legal recourse for the trustees.  Those “alternatives” were absolutely not suitable investments and it doesn’t take a genius to know that.  These alternatives are also illiquid and pay extremely high commissions to the person who sold them.  Seems to me the trustees were acting in their own best interests.  

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Sounds a lot like the pension gamble Frontline about KY.

 

https://player.pbs.org/viralplayer/3017663662/

 

tl;dr;  There was no accountability for the people running the pension, they funneled money into risky investments and hedge-funds trying to make up lost ground after the government raided the fund by not actually funding it for years before.  The trustees on these things don't know investing.

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35 minutes ago, methodical said:

Sounds a lot like the pension gamble Frontline about KY.

 

https://player.pbs.org/viralplayer/3017663662/

 

tl;dr;  There was no accountability for the people running the pension, they funneled money into risky investments and hedge-funds trying to make up lost ground after the government raided the fund by not actually funding it for years before.  The trustees on these things don't know investing.

 

 

That's why you have someone who knows more about it do it for you.

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39 minutes ago, Moiraine said:

 

 

That's why you have someone who knows more about it do it for you.

 

Yeah, ideally although I'd argue that you don't need to know THAT much to know that you shouldn't be gambling peoples retirement savings in hedge-funds and weird overseas investments and other risky financial instruments to make up ground when things go down.

 

Another problem is, they hire consultants to recommend investments, those consultants get kickbacks from the things they recommend.  Similar to say 401k where companies manage what investments are offered to employees and see kickbacks for that.  So obviously that's not transparent to the people that have money coming out of their checks in either case.

 

Pensions would be great, if they were responsibly and transparently managed and enough people that were paying into them knew about investing and held their employers and trustees responsible for any questionable fund management.  The problem is people don't want to learn about investing.  Which I get... its tedious and boring when you have very little capital to manage, but they're essentially throwing their money into a black box and assuming things are going to be great at some future date.  It'd be about as smart as sending your life savings over to your idiot cousin or a greasy haired Don Jr. looking wall street guy you don't know and saying "here make this as big as possible, I'll throw you more every month and I'll be back to collect in 30-50 years." 

 

You can't protect yourself if you don't know what you are looking at or never bother thinking about it and just assume someone somewhere is looking out for your money.  Unless you have a flat fee based fiduciary advisor that isn't happening and even then you need to know how to look out for yourself.

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2 hours ago, methodical said:

 

Yeah, ideally although I'd argue that you don't need to know THAT much to know that you shouldn't be gambling peoples retirement savings in hedge-funds and weird overseas investments and other risky financial instruments to make up ground when things go down.

 

Another problem is, they hire consultants to recommend investments, those consultants get kickbacks from the things they recommend.  Similar to say 401k where companies manage what investments are offered to employees and see kickbacks for that.  So obviously that's not transparent to the people that have money coming out of their checks in either case.

 

Pensions would be great, if they were responsibly and transparently managed and enough people that were paying into them knew about investing and held their employers and trustees responsible for any questionable fund management.  The problem is people don't want to learn about investing.  Which I get... its tedious and boring when you have very little capital to manage, but they're essentially throwing their money into a black box and assuming things are going to be great at some future date.  It'd be about as smart as sending your life savings over to your idiot cousin or a greasy haired Don Jr. looking wall street guy you don't know and saying "here make this as big as possible, I'll throw you more every month and I'll be back to collect in 30-50 years." 

 

You can't protect yourself if you don't know what you are looking at or never bother thinking about it and just assume someone somewhere is looking out for your money.  Unless you have a flat fee based fiduciary advisor that isn't happening and even then you need to know how to look out for yourself.

Good post.

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14 hours ago, BigRedBuster said:

 

Worst retirement plan there is.....other than none at all.

I don’t agree . There are many people enjoying retirement now, partially made possible by company funded pensions they earned through years of service to a company . If companies would   put even a minimal amount  of effort into keeping the plans funded it would still work,  sadly most companies choose not to do that any more .

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