Rhode Island state pension fund loses $466 million

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OBRAM
Art Stephenson
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Rhode Island state pension fund loses $466 million

Unread post by OBRAM »

http://www.providencejournal.com/news/2 ... 66-million

Why did anyone think they could do 7.5% a year returns. Why did smart people (teachers) believe them? This is a $20 billion problem.
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Ram1019
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Re: Rhode Island state pension fund loses $466 million

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Nerd alert warning:

As a person who works for a pension fund, I don't think 7.5% is not necessarily a high assumption. Most funds (public and private) hover around 7-8% investment assumption. There are going to be down years, especially for the way the state pension is allocated. The hedge funds are high risk/reward--which lost 7%. In a down market year, it could've been much worse had they put more eggs in the risk basket. It's very difficult to manage this fund since the unfunded liability needs to be improved from the rediculous COLA's and other benefit improvements politicians threw in there over the years. The only real way to do that is by getting higher returns (not contributions). This pension fund has been poorly managed for decades. It would have completely dissolved if then-treasurer Raimondo did not push for the big reforms. God I can't wait to start talking hoops again lol
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OBRAM
Art Stephenson
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Re: Rhode Island state pension fund loses $466 million

Unread post by OBRAM »

Only State and City governments use a 7.5% annual expected rate of return. Private Pension use more like 4%, where they still exist. We are in such a slow growth, low inflation, low interest rate period. 1/3 of all Developed World government Debt is Negative. The 10 Yr US government Bond historically had averaged a 6% return, today it is 1.59% and as I say, negative in other Euro and Japan government Bonds. 3% Colas in 1980 when inflation was 8% were maybe justified, 3% Colas when we have 1.3% inflation is not, which is why it was unsustainable.
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