Public pension managers probably violating their fiduciary duty by choosing investments for political reasons

Mark Perry:

Every January, the New Year sees millions of Americans make a host of resolutions; to give something up, exercise more, and of course most common of all, be more financially responsible. We look at our bank account and non-pension investments knowing that the more we save today, the more comfortable we will be when we retire.

But new research suggests that the financial cushion we spend years building up, may not be what be enough. According to a study released last week by Spectrum Group, many pension members are unaware that a significant number of public funds are underperforming and underfunded, partly at least, because they are increasingly focusing on socially or politically motivated investment strategies.

Spectrum’s study examined public pension members’ awareness of two of the nation’s largest and most politically active funds – the California Public Employees’ Retirement System (CalPERS) and the New York City Employees’ Retirement System (NYCERS). Conducted last November, the survey revealed that 63 percent and 80 percent of members respectively, “believe their funds are fully funded, even though both funds are underfunded.” Perhaps that unawareness can be explained by the fact that some of the shortfalls are covered by taxpayers: Annual taxpayer contributions have risen from $7.2 billion to $12.3 billion over the past 10 years in California and from $1.4 billion to $9.3 billion in New York since 2002.

Unsurprisingly, the research showed that pension members were not happy about these deficits when this was explained. Nearly three-quarters of CalPERS and two-third of NYCERS respondents said that managers should focus on maximizing returns and ensuring funds were able to cover their liabilities. Nationwide, members believe managers should spend only 9 percent of their time using public resources to “advance worthy political and/or social causes” and instead devote two-thirds of their efforts to meeting financial performance targets.
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The managers are appointed by liberals who expect them to do what liberals do by trying to pick winners and losers instead of looking at each investment on what is in the best interests of those the system is supposed to serve.  The Trump stock market is giving them an opportunity to recover, but are they taking advantage in the huge growth in stocks?  The data suggest otherwise.