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Pension insurer shifted to stocks - The Boston Globe
Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.

Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds.

The agency refused to say how much of the new investment strategy has been implemented or how the fund has fared during the downturn. The agency would only say that its fund was down 6.5 percent - and all of its stock-related investments were down 23 percent - as of last Sept. 30, the end of its fiscal year. But that was before most of the recent stock market decline and just before the investment switch was scheduled to begin in earnest.

No statistics on the fund's subsequent performance were released.

Nonetheless, analysts expressed concern that large portions of the trust fund might have been lost at a time when many private pension plans are suffering major losses. The guarantee fund would be the only way to cover the plans if their companies go into bankruptcy.

"The truth is, this could be huge," said Zvi Bodie, a Boston University finance professor who in 2002 advised the agency to rely almost entirely on bonds. "This has the potential to be another several hundred billion dollars. If the auto companies go under, they have huge unfunded liabilities" in pension plans that would be passed on to the agency.



"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Tue Mar 31st, 2009 at 10:35:21 AM EST
[ Parent ]
I forgot: hat tip Paul Krugman and TPM.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Tue Mar 31st, 2009 at 10:35:57 AM EST
[ Parent ]
Oh boy. This kind of news doesn't make me want to go Wheeeee!
by afew (afew(a in a circle)eurotrib_dot_com) on Tue Mar 31st, 2009 at 10:38:08 AM EST
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WTF?

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Tue Mar 31st, 2009 at 10:45:41 AM EST
[ Parent ]
Words EPIC FAIL.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Tue Mar 31st, 2009 at 10:49:22 AM EST
[ Parent ]
Bet their bonuses are sorted tho'.

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Tue Mar 31st, 2009 at 11:22:29 AM EST
[ Parent ]
See? This is why people's pensions should not be managed by the State and instead people should invest their savings in stocks... Oh, wait!

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Migeru (migeru at eurotrib dot com) on Tue Mar 31st, 2009 at 11:34:51 AM EST
[ Parent ]

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