Maryland’s public pension system pays more than $320 million in fees each year to professional fund managers who tout their ability to beat the market with smart investments.
But some financial experts question whether those fees really pay off for the more than 382,000 active and former state employees who participate in theretirement plan, including teachers, state police and judges.
The state’s pension portfolio is on track to fall below the program’s modest goal of a 0.51 percent return on investments for fiscal 2016, which ends June 30. As of April 30, the plan had earned a mere 0.12 percent.
If the fund continues to underperform through June, it could bolster an argument that Washington, D.C.-based financial analyst Jeff Hooke has made for at least the past five years — and that several other states have recently adopted: Public pension systems should bid farewell to high-cost financial wizards and shift more money into passively managed index funds such as those that mimic the Standard & Poor’s 500-stock index.
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DelMarVa's Premier Source for News, Opinion, Analysis, and Human Interest Contact Publisher Joe Albero at alberobutzo@wmconnect.com or 410-430-5349
This is a no-brainer. Following the S&P example yields a modest but overall steady growth over time. Re-invest that $320 million into the actual pension plans and come out way ahead in the end.
ReplyDeleteSome will scream. Let them.
How about this...
ReplyDeleteBeat the S&P by AT LEAST 1%, and get a 1% fee. For every point above the passive return on a 3 year annualized basis, you get .2% as a bonus. Miss the mark, and you get nothing.
With a pension fund value of about $55 billion, you could make $550 million in fees with just a little additional performance than the market. And you would make a killing with long term success.
Republicans in the house have been working tirelessly to stop protections that would force advisors to work in the clients best interest.
ReplyDeleteMD Politians still stealing from the State Employees Retirement Fund does not help the bottom line either.
ReplyDelete