Public Pension Funds, Expected Returns and Risk

I did not know this: public pension funds target the return they want to achieve, but do not do anything about the risk required to get there.

If market returns are already high, there’s no problem: a rising tide lifts all boats, and people will complain about their pension returns.

But what if the market is low and stable? In this case pension funds are more or less required to make more risky investments.

This is kind of like saying a football team that is having trouble making yards because of inclement weather ought to pass more.

Via Newmark’s Door.

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Comments

[Mario]

Several thoughts: this acnouct of western macro is missing a couple of key forces. I know, I know, it's a very short article covering entire worlds, but that strikes me as odd, and maybe useful to work with.For one, there's no mention of Marxism. For example, this bit: For almost three decades after the second world war these advisers seemed to know But their credibility did not survive the oil-price shocks of the 1970s. Those economists also wrote in the context of Cold War ideological combat, pitting their frameworks against a century's worth of Marxist economic work.Another thing: no mention of Hayek and Mises, the great free market thinkers. Enormously influential. Too much to fit in?

[Dave Tufte]

Thanks Mario.