Wednesday, April 27, 2016
Wednesday, March 16, 2016
There's big money to be made from "advising" these plans. A study from The Maryland Public Policy Institute looked at data from 33 state pension funds. In last fiscal year they examined, researchers found these pension funds paid collective fees of $6 billion!The Wall Street firms that collected these fees touted their ability to pick stocks and bonds that would "outperform a given section of the stock or bond market." They were handsomely rewarded for this alleged prowess. Unfortunately, it was a myth.The study found an inverse relationship between high fees and returns. The median five-year return for the pension funds in the study was 12.83 percent. If plans had fired their high-priced Wall Street investment bankers and instead invested in low-management-fee index funds, the annualized five-year return would have increased to 14.45 percent.The study found no evidence that alternative investments, such as hedge funds and private equity, beat the market.
Tuesday, February 2, 2016
- He has extensive investment management experience managing institutional mutual funds and index funds. He's even managed index funds for the State Pension Fund.
- He's very well qualified. An NYU MBA, a CFA and a CPA.
- He's not a career politician - he doesn't want to use the Treasurer's office to climb the political ladder.
- He's a really nice guy.
Let me state that again: Ron's plan can save the State at least half a billion dollars per year and potentially close to a billion dollars per year.
Thursday, January 7, 2016
Wednesday, August 26, 2015
Tuesday, June 16, 2015
Here's a snapshot of the statement. My fees are now 0.06% and 0.07% for two index products. Now that is what I call cheap!
It got me wondering, how much would the NC Pension Fund pay at these rates?
Assuming that the NC Pension Fund is about $90 Billion in assets, a 0.07% expense ratio would be about $63 million in fees.
Which raises the question: Why does the NC Pension Fund pay $500 million in fees? It appears that the fund is overpaying by about $437 Million annually.
Sunday, June 14, 2015
Second, the Treasurer seems to be pursuing a "pick winners" strategy. This is a fool's errand. You can't reliably pick winners in today's financial markets. All you will end up doing is paying high fees to so-called "experts" and getting average performance in exchange. A mountain of evidence shows this to be true.
What is worse is that the pension fund continues to move into Private Equity and Hedge Funds - both of which are incredibly expensive and do not provide the return for the risk and costs. As Andy correctly points out, the risk of these assets is understated because they don't trade daily in the markets.
I've been making these arguments for a few years now and during that time the fees paid by the pension fund have gone up from about $300 million/year to about $500 million/year.
This isn't small change. The state of North Carolina pays half a billion dollars a year to Wall Street firms who provide worse performance than if the State just indexed the money. At some point you have to question whether the Treasurer actually understands basic finance.
Thursday, June 11, 2015
A little shameless self promotion. Srini Krishnamurthy and myself are honored to take over as editors of the Financial Review.
The full details are over on the Poole College of Management site
The Financial Review website is here: financialreview.poole.ncsu.edu
Thursday, June 4, 2015
I've blogged about target date funds before, and how they are like hotdogs, but not in a good way.
Wednesday, May 13, 2015
That's out of more than 7,000 mutual funds.
Remind me again why anyone uses active management?