It’s Giving Tuesday! Your donation has 3X the impact today. Give Now

State pension funds in shady business

Stacey Vanek Smith Jan 15, 2010
HTML EMBED:
COPY

State pension funds in shady business

Stacey Vanek Smith Jan 15, 2010
HTML EMBED:
COPY

TEXT OF STORY

Bill Radke: Last year’s stock plunge hurt state pension funds. But it wasn’t just the markets. Investigations have found questionable practices at some funds. California just revealed that investment firms paid people off to get a chunk of the state’s pension business. Marketplace’s Stacey Vanek-Smith has our story.


Stacey Vanek-Smith: California’s public pension fund is the biggest in the country. And a review found that the agents in charge of investing California pension money collected millions of dollars in fees from eager investment firms. Similar things went on in New York, New Mexico and Illinois.

Kent Smetters is a professor of risk management at the Wharton School. He says pension funds were ripe to be ripped off.

Kent Smetters: They were the, kind of the cash cow that managers would go after, because they could still charge them pretty high fees, pension board members often didn’t push back.

So a lot of public pension money ended going to fees, risky real estate investments and hedge funds. Now many state pensions are underfunded. With baby boomers retiring, that will mean big changes for state pensions, says Elizabeth Kellar with the center for state and local government excellence.

Elizabeth Kellar: In the short run, you’re going to see a lot of plans that are asking for greater employee contributions. They’re going to create new tiers for new hires. Employers will have to put in more money.

Thirteen million Americans are on public pension plans.

I’m Stacey Vanek-Smith for Marketplace.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.  

Triple Your Impact 

It’s Giving Tuesday, and the Marketplace Investors Challenge Fund is matching gifts to triple your impact!