6 Ways Wall Street Is Hosing Chicago Teachers
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In These Times) During Andrew Cuomos tenure as attorney general of New York, he noted, In New York, the biggest pool of money is the state pension fund. This is true with public pension funds across the nationand Wall Street firms have leaped to take advantage of the bounty, often in unsavory ways. Over the last five years, the Securities and Exchange Commission (SEC) has routinely unearthed pay-to-play scandals, in which overseers of pension funds make investment choices based on personal gain.
In most cases, politicians control the investment-making decisions at pension funds. A select few, however, are controlled by their membersmeaning they could invest in projects for the public good on Main Street rather than private investment funds on Wall Street. One such fund is the Chicago Teachers Pension Fund (CTPF), a nearly $10 billion pool charged with assuring the retirement security of tens of thousands of education professionals. Despite a Board composed of 12 member-elected trustees, however, Wall Street still has its hands in the kitty. Here are six ways Americas biggest investment firms have the potential to sink Chicago teachersand just how the CTPF board can stop that from happening.
1. Underperformance
Historically, pension funds have been extremely conservative investors out of caution for their members finances. Only in the past 20 years have they amped up their allocations to higher-risk endeavors. And as Wall Street has quaked, so too have member livelihoods.
Over the past five years, the CTPFs assets in traditional investmentsdomestic equities (stock in large, financially sound companies) and fixed income (stable bonds)have been far more profitable than the portfolio as a whole. In that time period, the former returned 7 percent annually; in other words, if the fund had invested $100 in 2008, it would have made roughly $140 by 2014. Fixed income bonds, meanwhile, returned 6 percent. A traditional 60 percent stock, 40 percent bond portfolio, then, would have returned 6.6 percent. In order to be considered fully funded, the CTPFs investments must return 8 percent; though neither stocks nor bonds fulfilled this completely, they were still far closer than the CTPFs total investment return, which was a paltry 4.6 percenta loss of around $200 million per year. ................(more)
The complete piece is at:
http://inthesetimes.com/working/entry/17020/six_ways_wall_street_is_hosing_chicago_teachers