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Central States Pension Fund: How best to slice a pie

Another recent development on the Central States Pension Fund is the Government announcement that it will investigate the prior investment decisions of the fund.  Although an honest review of all areas of this impending disaster is certainly warranted prior to a decision on how best to mitigate the damages for those involved, there may be other motives for this review.

Typically, pension funds have outside investment advisors. Those advisors have deep pockets that may be an additional resource for a contribution.  The recommendations by these advisors will be reviewed with a critical eye to determine whether there is any ability to find another contributing ingredient to the dwindling pie.

In the attached article ( see here) House Representative Marcy Kaptur, D-Ohio (see here)   points to two investments she finds questionable: “It’s astonishing to now read about how Wall Street firms hired by Central States invested retirees’ pension funds in Iraqi banks in 2008 right in the middle of a full-scale war in Iraq. Or how they invested in unstable Russian banks when the economy there is in shambles, or how they sunk $1.4 billion into risky Single-A-rated mortgage-backed bonds in the middle of the housing meltdown.”

Large investment firms typically have the ability to support their investment recommendations and if the Funds overall investment returns are in line with other funds the investigation should go nowhere.  However, where it should go and where it will go are two different directions.

Clearly the fund is in trouble and we are interested in how this undesirable pie will be split.  By having another group at the party, the pieces get smaller for all involved.

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